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Microsoft invests in Barnes and Noble's Nook e-books

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The Guru

Microsoft has invested $300m (£185m) in a digital venture with US bookseller Barnes and Noble.

The deal could make Barnes and Noble's Nook e-book reader available to millions of new customers, integrating it with the Microsoft's new Windows 8 operating system.

The as-yet unnamed new company will be 82.4% owned by Barnes and Noble, with Microsoft getting a 17.6% stake.

The news caused the book store chain's shares to almost double.

But some industry commentators believe publishers will be "terrified" at the implications of the deal.

"This deal with Microsoft could be the saviour of its digital division but won't help the bricks and mortar business," Tim Coates, managing director of Bilbary, an e-book content provider, told the BBC. "In fact it could accelerate its decline.

"Publishers will be terrified of Barnes and Noble going digital only."

Barnes & Noble shares were up more than 80%, reaching $25, the highest level since 2009. Microsoft shares were unchanged.

The new joint venture will be be home to the bookseller's digital and college businesses.

Barnes and Noble announced at the beginning of the year that it was looking at splitting off its digital business. It said it does not yet know whether it will float the new company.

'Significant expansion'

The Nook e-reader was launched in 2009 to compete with Amazon's Kindle, allowing users to buy, download and read digital versions of books and magazines.

Its content will now be available to the growing number of people with mobile devices running Microsoft software.

"Microsoft's investment in Newco [the new digital and college unit], and our exciting collaboration to bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, will allow us to significantly expand the business," said William Lynch, chief executive of Barnes & Noble.

Microsoft's new Windows 8 operating system - due to launch this autumn - is specifically designed to work with touch screens and mobile devices like tablet computers.

Its Metro user interface can host small dedicated applications like Nook to sit on top of Windows.

"Our complementary assets will accelerate e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them," said Andy Lees, president at Microsoft.

"We're on the cusp of a revolution in reading."

Amazon's Kindle service is already available as a Windows 8 app.


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