Barnes & Noble is spinning off Nook, but what does that mean for Microsoft's investment in it?

Barnes & Noble has officially confirmed plans to spin off the company's Nook tablet and e-reader business, more than two years after it first announced plans to do so. As part of its 2012 plan, Barnes & Noble obtained a $300 million investment in Microsoft for the proposed Nook company, an agreement that may complicate the new spinoff plans.

In a press release issued today, Barnes & Noble said it plans to separate its primary book-selling and Nook units into two companies "by the end of the first quarter of [the] next calendar year." Barnes & Noble CEO Michael P. Huseby said the plan will help both Barnes & Noble and the impending Nook company by allowing them to focus on their strengths, though the two companies will likely operate closely together for the foreseeable future.

"We have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately," he said in a statement included in the press release. "We fully expect that our Retail and NOOK Media businesses will continue to have long-term, successful business relationships with each other after separation.”

Tucked away at the bottom of the press release, Barnes & Noble states that its future outlook is "subject to certain risks," most of which are associated with the Nook spinoff. Listed in those risks are three potential issues involving Microsoft's investment in the company: that the new Nook company will "not achieve the expected benefits for the parties;" that it won't be able "to perform its obligations" of Microsoft's agreement; and that there could be problems "associated with the international expansion contemplated by the relationship with Microsoft, including that it is not successful or delayed."

The third risk is perhaps the most interesting, as it means there's some form of "international expansion" for Nook planned with Microsoft. It's long been rumored that Nook will release a Windows-powered tablet, though Barnes & Noble never indicated it had plans for such a device. After Microsoft invested in the company, Barnes & Noble announced it would release a Windows 8 app for its Nook digital bookstore, which was released in November 2012. Microsoft's investment never resulted in a Windows-powered tablet, however, as Nook-branded tablets continued to be released with Android instead.

In December 2012, educational company Pearson invested $89.5 million in Nook Media, which reduced Microsoft's share in the soon-to-be company to about 16.8 percent. Following that investment, there were rumors that Microsoft was interested in acquiring Nook Media, though later reports surfaced that it actually had no desire to own the business.

Source: Barnes & Noble | Image via Barnes & Noble

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16 Comments

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I got a Nook Simple Touch last year when it was on sale and I love it for reading, great screen and very comfortable. Only problem is the battery goes completely dead after a only a few days even if it is turned off (it is supposed to last for months). Just my luck to get a defective one.

MS needs to get Nook, sure, but add it to their platform of services, not make new hardware. W8/RT and WP need Nook, Nook is already on other platforms, and MS doesn't have their own digital book store like Apple and Google. They can certainly license out so companies can make their own eBook readers, though... No fee, use our store, do revenue sharing... Win/win all around.

MS then needs to make Word export to ePub, giving every MS Word user an easy way to self-publish.

"We have determined that these businesses will have the best chance of optimizing shareholder value if they are capitalized and operated separately,"

This is what happens when you operate your business for short term profit. Spin-offs, instability, and uncertainty. Heck, the top search result for a "nook" app in the Windows Phone store is an app that I wrote while I was sick one monday. In college. Sick. And that's the top "nook" app!

Barnes and Noble needs to focus on selling books in the 21st century, and not focus on quarterly profits and losses for once.

utomo said,
When we will have good color e ink reader? It already too long to wait

It still amazes me that people buy none eink reading devices.

sagum said,

It still amazes me that people buy none eink reading devices.

I like setting my e-reader for a high contrast color scheme. It really helps the fight the dyslexia. I can't get that with e-ink currently.

NastySasquatch said,

I like setting my e-reader for a high contrast color scheme. It really helps the fight the dyslexia. I can't get that with e-ink currently.

Blacker on Whiter?

What e reader you use? I cant find a good one in the uk, i really find it hard reading normal books and having dyslexia.

Anyone know of e readers/e-ink readers that you can tint the screen?

greenwizard88 said,

Blacker on Whiter?

Bright Yellow on Dark Blue is the BEST color combo to combat dyslexia. Black and White are actually horrid for visibility as they blend into each other too much.

I am currently using my Android tablet and Moon Reader+ or Nook. I can't stand the Kindle or Google readers, they don't give me the control options I need or want.

sagum said,

It still amazes me that people buy none eink reading devices.

That's what I got. It makes all the difference in the world for long periods of reading, or reading on the bus/in the daylight. So my easier to see in changing light conditions.

sagum said,

It still amazes me that people buy none eink reading devices.

This 1000%!

How people can read books for extended period of time on a non e-ink device is beyond me. I bought a Kindle Touch used for $60 off the local swap. That's what I use.

What amazes me is that people think the B&N is about to go out of business. They are a profitable company. They make money. But they had no idea what to do about ebooks, till too late.

IMO, B&N should merge with another large retailer like Target and create an Amazon-like business. Despite lacking the variety of Amazon, their combined offerings could still create a significant online presence. Plus, some new Nook hardware on full display in Target stores across the country could significantly boost sales.

I don't think that Target, or really anyone else, has the kind of massive (interstate) shipping facilities and connections that Amazon has that would be necessary. None of the box stores really have a strong online shopping presence.

Figure 8 Dash said,
IMO, B&N should merge with another large retailer like Target and create an Amazon-like business. Despite lacking the variety of Amazon, their combined offerings could still create a significant online presence. Plus, some new Nook hardware on full display in Target stores across the country could significantly boost sales.

Walmart has the scale and distribution.