Saturday, December 27, 2014

Microsoft on Nook Business

Taken from Business Insider's article
How Microsoft Turned $300 Million Into $116 Million
MATT ROSOFF DEC. 4, 2014

Barnes & Noble and Microsoft have dissolved their joint venture, and Barnes & Noble is buying back all shares in the joint venture for $62 million in cash and stock worth about $54 million, according to a new SEC filing (Red:Total $116 Million ?).

That leaves Microsoft with a loss of about $238 million on the deal (Red:from $300 Million minus $62 Million ?). It also gives Barnes and Noble a cleaner exit if it wants to spin off the Nook business.

It also relieves Microsoft of certain obligations, like paying for operating expenses related to the venture.

The joint venture kicked off in April 2012 when Microsoft invested $300 million for a 17% stake in Barnes & Noble. The companies announced the deal with a lot of fanfare, but the details were always vague — they built a Nook app for Microsoft's Windows 8 operating system, and earlier this year, they said they were working on something called a "Microsoft Consumer Reader," which may have been a new kind of e-reading app. It never emerged.

The deal also ended a lawsuit between the companies.

Since the early 2000s, Microsoft has been approaching companies to license its patents the company believes are being violated. Many companies, including a lot of Android resellers, have agreed, and Microsoft may be earning more than $2 billion a year from these licenses.

But Barnes & Noble initially refused to take a license for its Nook reader, which was based on Android. And in the subsequent lawsuit, it started talking about some of the details of the negotiations with Microsoft, like its demands for between $5 and $15 per device, and the precise patents that Microsoft claimed were being infringed.

The joint venture made that lawsuit go away. So even if Microsoft never got much else out of the deal, one could argue that paying a couple hundred million to keep its patent licensing program cranking along was a pretty good bargain.

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