Microsoft forms new strategic partnership with Barnes and Noble

Microsoft and Barnes and Noble (B&N) have concluded a deal that will provide Windows 8 users in the US and internationally with access to one of the world’s largest digital catalogues of e-Books, magazines and newspapers.

The companies announced the formation of a strategic partnership in the form of a new B&N subsidiary. As part of the partnership, B&N will be making its NOOK digital book store available within Windows 8, when the new PC and tablet operating system is released later this year.

This new subsidiary, referred to as Newco (for the time being), will combine the digital and College businesses of B&N, with Microsoft making a $300 million investment in the new company. This will provide the Redmond-based software giant with around a 17.6% equity stake in Newco, leaving B&N with approximately 82.4% ownership stake in the new subsidiary.

Andy Lees, president at Microsoft explained that the shift to digital is “putting the world’s libraries and newsstands in the palm of every person’s hand”, and is the beginning of a journey that will “impact how people read, interact with, and enjoy new forms of content”.

“Our complementary assets will accelerate e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them. We’re at the cusp of a revolution in reading,” he elaborated.

Interestingly, the deal comes after over a year of patent litigation between B&N and Microsoft, and indicates that both companies have opted to bury their respective legal hatchets.

The two firms have settled all patent litigation between them going forward Microsoft stated that B&N and Newco, will have a royalty-bearing license under Microsoft’s patents for its NOOK e-reader and tablets.

William Lynch, CEO of Barnes & Noble added that the formation of Newco is a crucial part of B&N’s strategy to capitalise on the growth of the NOOK business, as it will allow the company to bring digital reading technologies as well as content to the Windows platform and its hundreds of millions of users.

In other patent related news, Apple and Samsung appear to be following in Microsoft and Barnes & Noble’s shoes. The two IT giants recently agreed to hold patent litigation settlement talks, with the CEOs as well as the chief legal counsels for both companies in tow.