Microsoft Corporation (MSFT), Barnes & Noble, Inc. (BKS): Is Windows Behind the NOOK Fire Sale?

Microsoft Corporation (NASDAQ:MSFT) got itself waist-deep with Barnes & Noble, Inc. (NYSE:BKS) in spring 2012 when it shocked a lot of people by paying $300 million for a one-sixth stake in Nook Media LLC, the subsidiary of Barnes & Noble that was going to produce the NOOK e-readers and related digital content. What made the deal even more surprising were a couple of things – first, the devices were going to run on the Android operating system by Google Inc (NASDAQ:GOOG) and not a Windows platform; and the alliance seemed especially interesting in that the deal came in the middle of a series of lawsuits between the companies, accusations being thrown hither and yon over patent being infringed and prior art claims. Suddenly, this deal meant Kumbaya for all involved?

The more drama came about after the holiday season last winter, when the NOOK bombed as a device. While it was lauded for its quality as hardware, it never really matched up in the competitive table market with Kindles, iPads, iPad Minis, Nexus 7 and Nexus 10 tablets flooding the market. As an e-reader, NOOK stood up well technically, but sales were abysmal, and it seemed that Microsoft Corporation (NASDAQ:MSFT) would lose much of its $300 million stake in Nook Media while Barnes & Noble, Inc. (NYSE:BKS) pondered jettisoning the Nook division and pulling out of the Nook Media venture altogether. Then there was talk that Microsoft was considering buying the Nook Media enterprise for $1 billion, though that rumor was debunked here in our newsroom a couple days later.

Barnes & Noble, Inc. (NYSE:BKS) is now establishing a fire sale for its existing NOOK inventory, selling its 8-gigabyte NOOK HD and NOOK HD+ devices for up to 45 percent off their original retail prices. But with Microsoft Corporation (NASDAQ:MSFT) still hovering around with its investment in Nook Media, the question is once again being raised – does Microsoft have interest in NOOK in some form?

The speculation is now revolving around the Surface RT tablet, as there are whispers that Microsoft Corporation (NASDAQ:MSFT) may be considering a 7-inch version of its tablet, but it may be looking to scrap the Surface and replace it with the NOOK and add the NOOK library of content (which stands at more than 3 million books, not counting music, videos and magazines) into the Windows Store. That would mean the NOOK would go through a transition from the Android platform over to the Windows platform. What about the smaller Surface RT tablet changing its name to the NOOK RT as a miniature version of the larger Surface device? There is a lot at play here, but the bottom line is that Microsoft is in the middle of he NOOK discussions until it’s not. Right now, it has 300 million reasons to stay involved in some way.

What do you think? Should Microsoft Corporation (NASDAQ:MSFT) absorb all of the NOOK content and hardware and incorporate it into its ecosystem? Do you think it will do so, or do you think the focus will mainly be on the content library and offer it cross-platform or as a Windows exclusive? Give us your feedback on this weird Microsoft-Barnes & Noble, Inc. (NYSE:BKS) alliance in the comments section below.

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