Barnes & Noble, Microsoft end Nook Media pact

Thu Dec 4, 2014 6:10pm EST
 
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By Yashaswini Swamynathan and Devika Krishna Kumar

(Reuters) - Barnes & Noble Inc (BKS.N: Quote) struck a deal to buy Microsoft Corp's (MSFT.O: Quote) stake in Nook Media LLC, ending a two-year partnership and clearing the way for the bookseller to spin off its loss-making e-reader and digital content division.

Barnes & Noble shares closed down 5.4 percent on the New York Stock Exchange after the company also reported a much-weaker-than-expected quarterly profit, due to lower sales of Nook devices.

The company estimated the value of the cash and share deal at about $125 million.

Nook, launched in 2009, enjoyed initial success but has ended up costing Barnes & Noble hundreds of millions of dollars as it was unable to keep pace with Amazon.com Inc's (AMZN.O: Quote) Kindle and Apple Inc's (AAPL.O: Quote) iPad.

Microsoft invested $300 million in Barnes & Noble's Nook e-reader in 2012 to gain a foothold in the fast-growing e-books market. As of Sept. 9, Microsoft owned about 17 percent of Nook Media through preferred shares.

Barnes & Noble said in June it would spin off its Nook Media business, which includes college bookstores, to focus on its retail book business.

"We mutually agreed that it made sense to terminate the agreement," a Microsoft spokesman said in an email. Microsoft will lose money on its initial investment, but will also be spared any future payments to fund Nook, which were running at about $21 million per quarter.

Under the agreement announced on Thursday, Microsoft will have the right to receive about 22.7 percent of total proceeds of Nook's digital business, which excludes the college bookstores, if it is sold in the next three years.   Continued...

 
A Barnes & Noble book store is shown in Encinitas, California  September 9, 2014. REUTERS/Mike Blake