Microsoft gets foothold in e-book field with $300 million to Barnes & Noble
NEW YORK - Books and bits united Monday as Microsoft provided an infusion of money to help Barnes & Noble compete with top electronic bookseller Amazon. In exchange, Microsoft gets a long-desired foothold in the business of e-books and college textbooks.
Microsoft Corp.'s $300 million investment sent Barnes & Noble Inc.'s stock zooming up $9.15, or 67 percent, to $22.83 in early afternoon trading. The shares closed at $20.75, up $7.07, or 51.68 percent on the New York Stock Exchange.
Microsoft's stock rose 4 cents, or 0.11 percent, to close at $32.01 on the Nasdaq Global Select Market.
The two companies are teaming up to create a subsidiary for Barnes & Noble's e-book and college textbook businesses, with Microsoft taking a 17.6 percent stake.
The deal gives Barnes & Noble ammunition to fend off shareholders who have agitated for a sale of the Nook e-book business or the whole company, but the companies said Monday that they are exploring separating the subsidiary, provisionally dubbed "Newco," entirely from Barnes & Noble. That could mean a stock offering, sale or other deal.
The deal also puts to rest concerns that Barnes & Noble doesn't have the capital to compete in the e-book business with market leader Amazon.com Inc. and its Kindle, said analyst David Strasser at Janney Capital.
For Microsoft, the investment means that it will own part of a company that sells tablet computers based on Google Inc.'s Android, one of the main competitors of Windows Phone 7, Microsoft's smartphone software.
Barnes & Noble investors have also been concerned about the recent government lawsuit against Apple and some leading publishers over alleged price fixing. When Apple launched its iPad in 2010, Simon & Schuster, Penguin Group (USA) and other publishers switched to an "agency" model that allowed publishers to set prices for e-books, a system many believe helped Barnes & Noble.
