Microsoft-Barnes & Noble Nook Deal Leaves Amazon Out in the Cold

By Jonathan Charles | May 01, 2012 12:53 PM EDT

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Even though Microsoft has said its $300 million investment into Barnes & Noble doesn't mean Windows 8 tablets are on the way, the company didn't rule out the possibility. Its investment also launches a threat to Amazon, whose Kindle line of e-readers and tablet was flying off the shelves, while Barnes & Noble was struggling.

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The investment drove Barnes & Noble's stock up to $1.7 billion, and gave Microsoft at 17.6 percent stake in the company. And, though, while Windows 8 Nook tablets won't be arriving for now, a Windows 8 app will arrive soon, bringing "one of the world's" largest digital catalogues to U.S. and international customers.

One may have to wait for at least a year before Kindle Fire 2 debuts, but the debut of a Nook Windows 8 tablet could be mere months away. Microsoft seems to be making a big investment in Nook to make it the default reader for its platform. Microsoft will probably have a big involvement in the Nook's future - a future that could be directed against Amazon.

Amazon controlled 90 percent of the e-book market before Apple launched the iPad and Google launched Android tablets, but Microsoft's launch of Windows 8 could be the biggest threat as the company wants an integrated ecosystem across all its devices like Apple.

Barnes & Nobles is the United States' largest bookstore chain, controlling more than 25 percent of the e-book market, but lagging behind Amazon. Microsoft's reimagining of Windows with Metro is a platform that could boost Barnes & Noble's prospects.

As a result, Microsoft will be entering a market where Amazon is competing with Apple's iPad. The deal is motivated by Apple and Amazon, who are controlling the tablet and e-reader markets respectively, James McQuivey, analyst at Forrester Research, said.

Some analysts also said Windows 8 needs to be more tightly integrated with services for buying books and other forms of entertainment to compete with rivals. Microsoft has launched the Windows Store in its latest operating system, a one-stop shop for developers' apps.

McQuivey said he expects Barnes & Noble to create a new line of Nook devices based on Windows 8 that will bring together hardware, software and content services.

(reported by Jonathan Charles, edited by Dave Clark)

 

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