| tl;dr -- meh. Newfound hope for Nook brand. B&N can go private. Microsoft has a shot to win at digital college textbooks. Bearish on rest. For anyone curious about the motivations behind this -- this sale frees up B&N to take its brick and mortar stores private. The CEO Riggio (? -- name escapes me now) has been asking for different private equity groups to buy the nook ("New corp") assets for some time since he thinks the stores are much more profitable. Last quarter results only confirmed as much (Nook did horribly, brick and mortar held their own). The one piece holding up spinning off the brick and mortar business was what to do with new corp and how much of a premium to give back to shareholders. Probably more interesting is how much of the college textbook business Microsoft got in the deal (distribution rights, retail locations, etc.). The textbook business combined with the emergence of new interactive college education is arguably more strategic than the reader. Microsoft could try to compete with iBooks for the next generation of textbooks and thus require people to get Surfaces (or Win8 or whatever) for college classes. We have to wait for the SEC paperwork to see for sure. I have little confidence MS can execute on such a strategy, but it sure looks good on powerpoint. There also is a bit of bravado at play -- Microsoft needs to demonstrate to its partners and their investors it will come rescue them when needed (think Nokia and Dell). The reality is that Amazon won the current generation of e-ink and online e-books. If color were to come to market (still just a prototype), it wouldn't be enough of a game changer. The next form factor to watch for and opportunity for someone to disrupt in e-ink is thin, flexible, and transparent e-ink -- the kind you can roll or fold up. For tablets, Microsoft would likely adopt the Nook brand since it's slightly better known than the Surface, but otherwise they would throw all of the existing tech away. It's too dependent on Android, and Microsoft would prefer to push its own tech. It makes me wonder if Nook's announcement to open up the tablet was the GM's way of doing right by customers should Microsoft make an extreme change (this deal would have been known by the people who approved betting on Google Play for Nook). The content play from this is questionable -- B&N is basically an American brand with most e-book sales growth happening elsewhere. Yes, Microsoft needs content in the US, but tech growth and new customers are elsewhere and this purchase doesn't really help Microsoft that much beyond what they could have gotten from the existing partnership. |