Microsoft takes stake in Barnes & Noble’s e-book business

Microsoft is making a $300 million investment in Barnes & Noble, creating a new subsidiary aimed at promoting the Nook.

The new subsidiary, currently dubbed Newco, will merge the digital and college businesses of Barnes & Noble. Microsoft’s investment will net it a stake of around 17.6 percent.

One of the first fruits of the deal will be a Nook application for Windows 8 – bringing the company’s digital bookstore to millions of new users.

“The formation of Newco and our relationship with Microsoft are important parts of our strategy to capitalize on the rapid growth of the NOOK business, and to solidify our position as a leader in the exploding market for digital content in the consumer and education segments,” says William Lynch, CEO of Barnes & Noble.

“Microsoft’s investment in Newco, 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.”

The two companies have now settled their patent litigation, and  Barnes & Noble and Newco will take a royalty-bearing license under Microsoft’s patents for its Nook eReader and Tablet products.

Earlier this year, Barnes & Noble revealed that it was considering spinning off its digital business. Now that this business is part of Newco, the company says it still plans to continue looking at options for a separation – but there’s no timetable for this, and it may not happen at all.