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Microsoft Invests In Nook

05/01/2012

Microsoft’s investment of $300 million in Barnes & Noble’s Nook Division signals interesting intentions for both companies.

For Microsoft, the 17.6 percent stake in Nook gives them some skin in the tablet game.

For Barnes & Noble the move is far more important. In fact it’s safe to say this is a lifesaver for the company. On it’s own, Barnes & Noble is a retailer looking to connect with consumers.

What I see is this:

  • A Retailer With A Long View – This is a strategic move by a retailer to move its retail experience to a new level. Aligning itself with Microsoft insures that Barnes & Noble has access to a deep-pocketed marketing, sales and R&D partner. This is critical as Barnes & Noble looks to create distinction in the market and to avoid becoming the Best Buy of the reading material sector. For example Barnes & Noble has announced that its ebooks will be making a push for the education market
  • More Ammo For Fight With Apple – With 61 percent share, Apple’s iPad dominates the eReader market. Worldwide consumer tablet sales are forecasted to reach 118.9 million units in 2012, according to market research firm Gartner. The figure represents a 98 percent increase from 2011, when Gartner says 60 million media tablets were sold
  • Positioning For Digital Content Creation – It’s no secret that digital content is desirable in the foreseeable future. If Barnes & Noble is successful at leveraging their expertise in delivering content its consumers want with Microsoft’s technology abilities, Barnes & Noble could be in a position that would be envied by Amazon’s Kindle Division
It’s possible that Microsoft might be able to learn a thing or two about retailing. Currently the Microsoft Windows stores are physical copycats of Apple stores…but the product, service and experience are lacking. Barnes & Nobles’ merchants might lend a hand here.

Immediate reaction to the announcement was to send Barnes & Noble stock up 52 percent to a 12-month high, closing at $20.75. The long-term will have to play out but it is fair to say a Barnes & Noble with Microsoft in the pocket is far stronger that a Barnes & Noble without the technology giant.

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