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Microsoft Corporation (MSFT): Is A Payoff Hidden In That NOOK?

Microsoft Corporation (NASDAQ:MSFT) certainly must have seen a plan for the NOOK e-reader tablets made by Barnes & Noble Inc (NYSE:BKS), although investing $300 million in the endeavor to create a new company, Nook Media LLC, was basically lunch money in terms of investment – certainly compared to the more than $8 billion the company spent to buy Skype. But as the one-year anniversary of the Microsoft-Barnes & Noble alliance passed last week, there has been some Monday-morning quarterbacking as to whether this investment has paid off.

After a year, and with sales of the NOOK tablets falling through almost every pessimistic floor, the general consensus is … well, no, there has not been a return on investment in any real way for Microsoft Corporation (NASDAQ:MSFT) in its NOOK Media enterprise. But is it time to cut bait, since Barnes & Noble Inc (NYSE:BKS) has indicated earlier this year that it was going to seek buyers for its NOOK division.

And with NOOK just last week agreeing to open users to the Google Play Store for the first time – adding 700,000 apps to the NOOK library of about 10,000 – Microsoft is trying now to gain something off a rival, since Windows was not an option for the operating system of the NOOK, but rather the Android OS by Google Inc (NASDAQ:GOOG).

But those who follow Microsoft Corporation (NASDAQ:MSFT) should know by now that the company, in all of its operations and investments, looks to the long-term view for its investment decisions. And with some development moving forward, this $300 million investment may be something in another year or two, according to some analysts.

For example, some note that the looser licensing standards invoked by Microsoft in recent weeks opens the door for the possibility of a small e-reader or tablet – something in the 7- to 8-inch range, which is more ideal for e-readers – just might present a NOOK device that is smaller and runs on a Windows platform, either Windows 8 or RT. This could also open the door to possibly integrating an Xbox experience into a tablet vehicle, according to one analyst- which might make sense considering Xbox success and the gaming explosion on mobile devices overall.

Might the NOOK HD line of e-readers have smaller cousins coming out that could run on Windows by Microsoft Corporation (NASDAQ:MSFT) while the bigger versions remain on Android by Google Inc (NASDAQ:GOOG)?

Wes Miller, an analyst for a Microsoft-watching firm called Directions on Microsoft, said recently, “It’s definitely possible that [Nook Media, the Microsoft-Barnes & Noble e-reader subsidiary] will do a Windows tablet, but those are cards we can’t see.”

What do you think? Will Microsoft Corporation (NASDAQ:MSFT) get a return on its investment with the NOOK? What would you do to energize sales of the device – switch to Windows? Go to a smaller size? What other features would you like to see in such a device that would make you buy one? Let us know your thoughts in the comments section below.


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