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Microsoft Invests $300M in Nook Tablet, Textbook Business

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In an effort to take some of the e-publishing market share away from dominant players Apple and Amazon, Microsoft is investing $300 million in Barnes & Noble's Nook e-reader, the two companies announced Monday.

The investment will create a new subsidiary within Barnes & Noble called Newco, and that subsidiary will also include Barnes & Noble's college e-textbook business. Nook Study is a platform available on PCs and Macs that allows students to buy or rent textbooks and use proprietary Nook software to annotate and interact with the content. Nook Study can also be integrated into various learning management systems, including Blackboard, Moodle, and Desire2Learn.

Microsoft will get a 17 percent stake in Newco. Ultimately, the deal will bring greater integration between the Nook platform and Microsoft's Windows operating system. The first resulting product will be a Nook reading and bookstore application for the upcoming Windows 8 operating system for computers, smartphones, and tablets; the application is currently available on the iPad and Android devices.

Ironically, Microsoft sued Barnes & Noble last year, claiming the Nook violated Microsoft's patents. As a result of the deal, that litigation has been settled.

While the education focus of the deal is centered around electronic textbooks for college students, there could be potential for K-12 adoption. For both Apple and Amazon, K-12 classrooms initially embraced iPads and Kindles without those companies making concerted efforts to sell into those markets. Now, they are everywhere. A 16-gigabyte Nook Tablet, a color e-reader that runs apps and plays multimedia, costs $249 through the Barnes & Noble store. Other variations of the Nook with different levels of memory storage, presentation, and functionality are offered at prices as low as $99. Those tablets currently run Google's Android operating system.

There is already a smattering of Nooks making their way into public school districts. Late last year, Houghton Mifflin Harcourt and Barnes & Noble partnered to provide Nook Color tablets pre-loaded with content from HMH and Cleveland Metropolitan School District to every student in two Cleveland schools. Just last week, ACSD announced it would offer 300 professional development books through the Nook.

Tablets that run on the Windows operating system are also making their way into K-12 schools. On Sunday, The Daily Progress, in Charlottesville, Va., reported on an initiative at Charlottesville public schools that brought 392 Fujitsu Stylistic tablets, which run on Windows 7, into grades 6-12 classrooms. As Tom Vander Ark notes those devices don't have a large app store, like those available on iPads or Kindles. But with Windows—a platform already popular on laptops and desktop computers in schools—planning its own digital marketplace, and Barnes & Noble's e-library on board, the integration possibilities could open both companies to more readers within the education market. Given the dominance of Apple and Amazon in that market, they will be playing catch-up.

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