The idea of going into a bookstore and walking out with a tablet or other device might sound contradictory, but it could be the future for Barnes & Noble (BKS).
The bookseller announced this morning a plan to spin off its digital and college divisions into a subsidiary and partner with Microsoft (MSFT) in a digital reading venture the two companies have dubbed Newco. The Windows creator will invest $300 million in return for a 17.6 percent equity stake in the new business. Goldman Sachs analyst Matthew Fassler called the deal a “game-changer.”
Barnes & Noble shares surged about 60 percent Monday on news. Microsoft shares were flat.
“To me, the key takeaway is this guarantees the long-term viability of the Nook,” said Bob O’Donnell, an analyst at IDC.
From a technology angle, it makes sense: Microsoft and Barnes & Noble need each other to better compete in the e-reader and tablet business. Fassler wrote, “Our biggest concern for BKS has been its ability to compete against AAPL (Apple) and AMZN (Amazon), two of the deepest-pocketed players in the technology and media world. NewCo now has an equally deep-pocketed partner.”
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