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Microsoft Teams Up With B&N's Nook

May 1, 2012, 8:00 AM
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Within hours of Microsoft’s announcement that it would pump $300 million into Barnes & Noble’s Nook, tech bloggers were sounding the “iPad killer” drumbeat. The money will go into a company cleverly called Newco, with the name to be determined later, a subsidiary that will help accelerate the transition to e-reading, “at a post-money valuation of $1.7 billion in exchange for an approximately 17.6% equity stake,” the company ies say in the release announcing the deal. The New York Times points out that’s “nearly double what Barnes & Noble’s entire market capitalization was on Friday. Indeed, it’s worth more than what the parent company has been valued at any time since mid-2008.” 

The Times also says Microsoft is paying “$60 million a year over three years as an advance on revenue-sharing arrangements, according to regulatory filings. The software company is also paying $25 million over the next five years to help the business acquire new content, which is likely to include the purchase of foreign rights for digital media.” 

“The formation of Newco and our relationship with Microsoft are important parts of our strategy to capitalize on the rapid growth of the NOOK business, and to solidify our position as a leader in the exploding market for digital content in the consumer and education segments,” says William Lynch, CEO of Barnes & Noble, in the release. “Microsoft’s investment in Newco, and our exciting collaboration to bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, will allow us to significantly expand the business.

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