Microsoft nixes Nook tiff with Metro deal

Anti-Amazon deal paves way for international future?

Microsoft has found a novel way to deal with its Nook e-reader Android dispute with US book-seller Barnes & Noble (B&N), investing US$300 million in a blandly-named subsidiary "New Co", designed to support Microsoft’s forthcoming Windows 8 release. 

“The partnership with Microsoft will have many dimensions, but the overarching goal is to create compelling experiences across a range of Windows devices, allowing users to buy, consume and create content,” said William Lynch, Barnes & Noble chief in a webcast Monday. 

The deal spells the end of one of Microsoft’s many Android-related patent disputes with white-box and content-brand device makers, and gives Microsoft a 17.6 per cent stake in the joint venture valued at US$1.7 billion. 

"Barnes & Noble and Microsoft have settled their patent litigation, and moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoft’s patents for its Nook eReader and tablet products. This paves the way for both companies to collaborate and reach a broader set of customers," Microsoft said in a statement.

Microsoft president Andy Lees said in a webcast that the partnership with B&N provided an "option ... to define the future of reading".

"We think we're going to have a much larger role than just being the platform provider," he said.

"We are not releasing any more details about our roadmap but we are seeing a lot of areas of collaboration between Barnes & Noble, New Co and Microsoft."

Nook complaint

Late last year B&N filed a complaint with the US Justice Department over Microsoft’s efforts to squeeze fees from it over its use of Android.

Microsoft has pursued license agreements over court cases, striking deals with over 50 percent of Asian hardware manufacturers of Android operating system-based devices.

B&N had complained that Microsoft’s claims over its Nook device -- a rival to Amazon’s e-tail business and its forked-Android Kindle and Kindle Fire devices -- were “trivial and outdated patents”.

Who wins?

Exactly how Microsoft stands to gain from this new deal remains to be seen.

The first outcome of the deal will be a Nook application for Windows 8, yet Lynch said B&N will continue to deliver apps for Android and iOS devices.

Lynch said B&N also had no intention of selling Microsoft software through its online retail store “at this stage”. 

However, it should also ensure that B&N does not spin off its Nook business, as previously planned, The Register reported. 

The deal with B&N comes at an interesting juncture for Microsoft, which is expected to release its desktop, tablet and ARM (Windows RT) compatible Windows 8 operating system before Christmas 2012.  

Analyst firm Gartner last month forecast Microsoft’s Windows 8 Metro tablet to flop with consumers, but to gain some traction through enterprise customers.

The B&N deal is squarely aimed at consumers and the tertiary market and Microsoft's press statement highlights the "international" benefits of the deal, but also contains a lengthy warning that the venture contains a variety of risks that may render it unsuccessful.