Microsoft is investing $300 million in the new unit, named Newco for now, for a 17.6 percent share. That translates to a valuation of $1.7 billion, which is interesting since prior to today, Barnes & Noble in its entirety wasn't even valued at $1 billion. Early Monday morning, its stock was at $22.15, up $8.47 or 61.89 percent. With that increase, it was valued at $1.29 billion.
In addition, the companies announced that there will be a Nook application for Windows 8 tablets, set to be available this fall. You'd expect that app to be pre-installed and in a prominent position on home screens.
There might be moves in other areas, as well. There is already a Nook application for Windows PCs, but there is none for Windows Phones.
It's an interesting conundrum for the Redmond, Wash.-based company. This investment gives Microsoft a share of a subsidiary which sees the Nook device central to its business. The Nook uses a forked version of Google's Android platform, currently the No. 1 mobile device platform globally, while its own smartphone platform continues to languish.
In addition to Barnes & Noble's digital business, the subsidiary will include the retailer's college business, too. B&N gets a needed infusion of cash, and Microsoft gets into the e-book business, which has been dominated by Amazon.com and Barnes & Noble, but also includes its mobile device competitors Apple and Google.
The two companies have also confirmed that this means an end to any patent litigation between them. Going forward, Barnes & Noble and Newco will have a "royalty-bearing license under Microsoft’s patents for its NOOK eReader and Tablet products."
Long-term, Barnes & Noble added, Newco may nor may not be separated from the main company. Barnes & Noble said it will "explore all alternatives for how a strategic separation of Newco may occur," but that there can be no assurance that the review will result in a strategic separation or the creation of a stand-alone public company."
There is also no set timetable for the review.
While Barnes & Noble stock has skyrocket over the news, on Monday morning, Microsoft stock had hardly budged at all, moving up a mere $0.02.