Microsoft, Barnes & Noble Deal: More Than A Lawsuit Killer

Many of us at BYTE were mildly surprised Monday with the announcement of Microsoft's $300 million and approximately 18% stake in a yet to be named new venture between them and Barnes & Noble, which will own the remaining share of the new company. It's been reported that the new unit will be worth about $1.7 billion and have a market cap of about $800 million as of 27, April 2012.

My take is that this is a legal move by Microsoft to make litigation with and B&N's college text book business disappear. For Microsoft, while this may be important, what'd I'd like to see come from this is for Microsoft to address the hole it created by killing MS Reader. I've got hundreds of DRM'ed eBooks that I've been unable to read since support for the once (somewhat) widely used eBook software died a few years ago. Microsoft also is missing an eBook solution in both Windows 8 and Windows Phone, and this deal may help plug the hole, provided the MS Reader compatibility gap is filled.

BYTE's Todd Ogasawara  and Serdar Yegulalp both have thoughts along this vein. Says Yegulalp, " I'm thinking this is MS helping to make the next gen Nook into a WinPhone slate device, as a slap against Amazon in multiple venues ." Expounding on this, Ogasawara said, " I'm leaning towards the "they want to build a low-cost Windows RT eBook reader camp myself despite the fact I think it might be a bad move. It is a good idea but a bad move just because of Microsoft's track record with Microsoft Reader (software), buying Sidekick, and building the Kin."

In case you don't recognize it, Microsoft Reader was an eBook platform released in 2000 and abandoned in August 2011. Read the Wikipedia article on it for some more background.

BYTE's Dino Londis says this "could be like the Nokia deal where MS partners with a [firmly-established but] struggling number 2 or 3 and leapfrogs [on] the hardware build and name recognition." BYTE's Editorial Director, Larry Seltzer adds, "maybe 'Nook Reader' will be a standard item on Win8 tablets, along, maybe, with a discount on content. That kind of makes sense to me."

MS has been very quiet about this deal, and hasn't offered much insight into the move. There's not a lot of upgrade interest in Windows 8, as its focuses on touch and a tablet-based form factor that MS partners have yet to introduce to the tablet-loving public. Microsoft may simply be working overtime, trying to garner interest in Windows 8 and/or Windows 8 RT.

While all signs point to work needing to be done in that area, this particular move with B&N has me puzzled. MS has enough work to do reestablishing internal direction for a once more-dominant mobile platform. As Todd Ogasawara points out, Microsoft's acquisition and mobility track records haven't generated a lot of confidence. If this is anything else other than making the litigation go away, they better have a strong mobile leader driving the strategy behind it, or the resulting fallout could be damning. I clearly have to place this deal in the wait and see column.

What are your thoughts?  Why not join us in the discussion by chiming in, below.