Microsoft has not exactly been sleeping at the wheel when it comes to the fast-growing tablet computer market. It has the tablet-friendly Windows 8 slated for release this year. It also has a grand strategy of the whole world accessing the services and data, both online and local, through a wide variety of devices-all running a Windows OS. Considering the huge growth of the e-books market and this market’s relationship to tablets, it is not entirely surprising to see why Microsoft decided to pull the trigger on the $605 million investment deal it announced with Barnes & Noble’s Nook e-reader. Microsoft is definitely swinging for the fences in its competitive struggle against Apple and Amazon’s grip in the ever expanding tablet computer market.
Interestingly enough, the announcement comes out six months away from the launch of Microsoft’s answer to Apple’s supremacy in the tablet and smart phone markets-Windows 8. Including a Nook app on Windows-powered tablets will allow these machines to go head to head with both Amazon’s Kindle Fire e-book reader and Apple’s iPad.
Besides giving the software behemoth a toehold in the tablet space, the Nook deal gives the Redmond Washington company a stake in electronic publishing. This is very important because the Nook has a great market presence in an industry that is about to explode-downloadable college textbooks. This marks a radical departure for publishers as they shift to a digital and mobile distribution platform. Microsoft’s Nook move strategically positions the software giant to benefit from the impending sea change in academic publishing. The educational textbook market is a massive market and Microsoft is moving in at precisely the time the industry is experiencing a seismic shift.
Indeed, some analysts agree that Microsoft’s Nook move was a good one. According to Sid Parakh of the McAdams Wright Ragen fund firm, the Nook buy-in gives Microsoft access to a new market that has been growing fast. Parakh said Microsoft have previously sat out this market and now they are well-positioned. Also, this would make the Windows 8 platform more compelling for e-readers.
Barnes & Noble got a much-needed injection of capital out of the deal. It also gives the firm a way to get into the global digital books market. The new unit formed with Microsoft will be managed by Barnes & Noble and they will also be the majority owners. The new unit will keep its relationship with the bookstore chain’s close to 700 outlets.