Leave it up to Microsoft (NASDAQ:
) to help kick off the week with an interesting story. The
computer giant is making a significant $300 million investment in
Barnes & Noble's (NYSE:
) digital-book business and college texts units. It's a
fascinating move that helps value the Nook business, but also
provides some direction about MSFT's ambitions for the year.
That investment will give Microsoft a 17.6% stake in a new
"Nook" subsidiary that will, in turn, value it at $1.7 billion.
Compare that to BKS's current valuation of roughly $791 million,
and it seems obvious that BKS's digital business could soon be
separated from its retail business.
Eyebrows were raised when Barnes & Noble made a move into
the digital market with the Nook but, with the subsequent demise
of Borders highlighting the problems facing the chain book store
industry, the maneuver has proven to be inspired. Many times,
companies like Kodak and Radio Shack (NYSE:
) are accused of not having the ability to roll with technology.
When a company likes BKS succeeds doing exactly that, it should
be heavily commended.
In fiscal terms, Microsoft just did exactly that.
The investment comes with a clause that will mean a Nook
application will be included in the new Windows 8, which will be
previewed in June. That will be followed later in the year by
computers and tablets on sale featuring Windows 8.
But the alliance will confuse some, especially after the two
companies were at loggerheads last year when MSFT sued BKS,
saying that the Nook infringed on patents. In turn, BKS said that
Microsoft was trying to bully smaller companies that were using
) Android operating system, as the Nook currently does.
If you can't beat 'em, join 'em, right? This new alliance sees
the patent litigation settled. Barnes & Noble is looking into
spinoff options for the Nook business, though it has quietly said
that such a move may never come off. However, no matter how the
business is structured, this massive cash injection from
Microsoft will see BKS have more access to international markets.
It seems as if everyone's a winner.
"Microsoft's investment in, and our exciting collaboration to
bring world-class digital reading technologies and content to the
Windows platform … will allow us to significantly expand the
business," Barnes & Noble Chief Executive William Lynch said
in a statement.
Following the news, BKS shares shot up and, at the time of
writing, are up 5.23%.
(c) 2012 Benzinga.com. All rights reserved. This material
may not be published in its entirety or redistributed without
the approval of Benzinga.