A Match Made In? Microsoft and Barnes & Noble Finalize 'Nook Media' Partnership

Snakes and snails and puppy dogs' tails.

Microsoft's strategy these days seems a tad, well, reactive. The latest major partnership initiative with Barnes & Noble, the largest US bookseller (bricks and mortar division) with a sizable web presence and an interesting entry in the e-reader category follows on the heels of MSFT's Nokia connection.

A generous interpretation would suggest that these are undervalued assets whose acquisition (broadly speaking) provides some quick-and-dirty counter-programming to the looming threats posed by Apple and Amazon.

But a less fulsome analysis might raise questions about why alliances with companies perceived to be also-rans in their respective markets enhances both the brand equity and the strategic positioning of the mighty Bellevue behemoth.

Perhaps the most apt metaphor is treading water. Microsoft continues to throw off lots of cash, has a bright staff and experienced leadership. But it has become the latter-day equivalent of the old AT&T. What analyst's used to call a 'widows and ophans' stock. Not a tech high-flier, but a safe investment that will generate unexciting albeit dependable returns.

And maybe that's enough for now. IBM went through a long period of experimentation and self-examination before it re-invented itself. Writing off a company of Microsoft's capabilities would be a mistake. It is applying its vast cash hoard judiciously to keep itself in the game until the next big thing or some strategic re-calibration pays off. It is not clear when or if that will happen but sometimes you just have to keep trying. And maybe those assets really are undervalued. JL

Laura Owen reports in GigaOm:

Barnes & Noble and Microsoft have finalized their previously announced partnership, which spins B&N’s digital and college businesses off into a subsidiary that will now be called Nook Media. Microsoft is investing $300 million in the new company and retains a 17.6 percent stake. Barnes & Noble and Microsoft have finalized the strategic partnership that they first announced in April. The new subsidiary, called Nook Media, comprises Barnes & Noble’s Nook and college businesses. As previously announced, Microsoft is investing $300 million in Nook Media and will hold a 17.6 percent stake in the new company, with Barnes & Noble owning the remaining shares.

The partnership means more ebooks and a Nook app forWindows 8. “We look forward to working closely with our new partner Microsoft to add value to their innovative new platform by bringing great reading experiences and one of the world’s preeminent digital bookstores to millions of Windows 8 users,” Barnes & Noble CEO William Lynch said in a statement.

The partnership will also focus on international expansion. Barnes & Noble is launching the Nook in the UK for the first time this fall, and Microsoft president Andy Lees said Microsoft is “excited by Nook Media’s product roadmap and expansion into markets around the world as demonstrated by their recent launches in the United Kingdom.” Microsoft will pay Nook Media $25 million a year for the first five years to assist with the development of local-language reading content and technology