Microsoft Investing $300 Million in eReading Partnership with Barnes & Noble

NEW YORK/REDMOND, WA—April 30, 2012—Barnes & Noble and Microsoft announced the formation of a strategic partnership in a new Barnes & Noble subsidiary, which will build upon the history of strong innovation in digital reading technologies from both companies. The partnership will accelerate the transition to eReading, which is revolutionizing the way people consume, create, share and enjoy digital content.

The new subsidiary, temporarily called Newco, will bring together the digital and college businesses of Barnes & Noble. Microsoft will make a $300 million investment in Newco at a post-money valuation of $1.7 billion in exchange for an approximately 17.6 percent equity stake. Barnes & Noble will own approximately 82.4 percent of the new subsidiary, which will have an ongoing relationship with the company’s retail stores. Barnes & Noble has not yet decided on the name of Newco.

One of the first benefits for customers will be a Nook application for Windows 8, which will extend the reach of Barnes & Noble’s digital bookstore by providing one of the world’s largest digital catalogues of eBooks, magazines and newspapers to hundreds of millions of Windows customers in the United States and internationally.

The inclusion of Barnes & Noble’s college business is an important component of Newco’s strategic vision. Through the newly formed Newco, Barnes & Noble’s industry leading Nook Study software will provide students and educators the preeminent technology platform for the distribution and management of digital education materials in the market.

“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,” said 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 shift to digital is putting the world’s libraries and newsstands in the palm of every person’s hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content,” said Andy Lees, president at Microsoft. “Our complementary assets will accelerate eReading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them. We’re on the cusp of a revolution in reading.”

Barnes & Noble and Microsoft have settled their patent litigation, and moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoft’s patents for its Nook eReader and Tablet products. This paves the way for both companies to collaborate and reach a broader set of customers.

Newco

On Jan. 5, 2012, Barnes & Noble announced that it was exploring the strategic separation of its digital business in order to maximize shareholder value. Barnes & Noble is actively engaged in the formation of Newco, which will include Barnes & Noble’s digital and college businesses.

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