B&N, Microsoft team up on college businesses

Listen to this article

NEW YORK — Books and bits united Monday as Microsoft provided an infusion of money to help Barnes & Noble compete with top electronic bookseller Amazon. In exchange, Microsoft gets a long-desired foothold in the business of e-books and college textbooks.

Microsoft Corp.’s $300 million investment sent Barnes & Noble Inc.’s stock zooming up $9.15, or 67 percent, to $22.83 in early afternoon trading. The opening price of $26 was a three-year high. Microsoft’s stock rose 2 cents to $32.

The two companies are teaming up to create a subsidiary for Barnes & Noble’s e-book and college textbook businesses, with Microsoft taking a 17.6 percent stake.

The deal gives Barnes & Noble ammunition to fend off shareholders who have agitated for a sale of the Nook e-book business or the whole company, but the companies said Monday that they are exploring separating the subsidiary, provisionally dubbed “Newco,” entirely from Barnes & Noble. That could mean a stock offering, sale or other deal.

The deal also puts to rest concerns that Barnes & Noble doesn’t have the capital to compete in the e-book business with market leader Amazon.com Inc. and its Kindle, said analyst David Strasser at Janney Capital.

For Microsoft, the investment means that it will own part of a company that sells tablet computers based on Google Inc.’s Android, one of the main competitors of Windows Phone 7, Microsoft’s smartphone software.