Below is a press release about the partnership:

New York, NY and Redmond, WA (April 30, 2012) – Barnes & Noble Inc. (NYSE: BKS) and Microsoft (NASDAQ: MSFT) today 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 e-reading, which is revolutionizing the way people consume, create, share and enjoy digital content.

The new subsidiary, referred to in this release as 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% equity stake. Barnes & Noble will own approximately 82.4% 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 e-Books, magazines and newspapers to hundreds of millions of Windows customers in the U.S. 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 e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them. We’re at 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 January 5, 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. The company intends to explore all alternatives for how a strategic separation of Newco may occur. There can be no assurance that the review will result in a strategic separation or the creation of a stand-alone public company, and there is no set timetable for this review. Barnes & Noble does not intend to comment further regarding the review unless and until a decision is made.

Additional information will be contained in a Current Report on Form 8-K to be filed by Barnes & Noble.

Barnes & Noble and Microsoft will host an investor call and webcast beginning at 8:30 A.M. ET on Monday, April 30, 2012. To join the webcast, please visit: www.barnesandnobleinc.com/webcasts.

Book retailer company Barnes & Noble is considering spinning off their Nook e-reader unit so that they can continue to scale that business.  Barnes & Noble wants to “unlock” the value of the Nook unit.  Barnes & Noble is projecting that they will earn revenues of $7 and $7.2 billion in 2012 even though Wall Street was predicting $7.33 billion.  The losses are due to investments in the Nook business and sales of the Nook Simple Touch.

Another possibility is that Barnes & Noble may looking into international expansion of the device with manufacturing partners.  Barnes & Noble said that the Nook unit sales were up 70% from one year ago.  The Nook Tablet sales had exceeded their expectations, yet sales of the Nook Simple Touch did not do very well.

Barnes & Noble is projecting digital content sales of $450 million for the fiscal year 2012.  By the end of 2012, the company is predicting that the run rate of digital content sales will be at about $700 to $750 million.

As of right now, Barnes & Noble’s brick and mortar retail overshadows the Nook device so there is no telling what will happen if they spin it off as a separate entity.  Barnes & Noble’s retail stores’ nine-week holiday sales were up 2.5% from a year ago to $1.2 billion.  BN.com sales are also up 43% to $327 million during the same period.

Barnes & Noble saw a drop of physical book sales, but losses were offset by strong NOOK sales and the liquidation of Borders book stores. Barnes & Nobles saw an increase by 17% from the same quarter last year, which was boosted another 10.7% during the three-day holiday weekend. Barnes & Noble reported a $6.6 million net loss, which is an improvement over the $12.6 million net loss from the year before.

[B&N Press Release]

Microsoft has accused Barnes & Noble of infringing on five patents and filed a complaint with the ITC. Microsoft is seeking the block of imports for the Nook e-book reader devices. Barnes & Noble made four letters and a presentation to the Justice Department public.

Microsoft said that they own patented inventions that are used in the Android operating system. Microsoft made patent royalty deals separately with Samsung and HTC, the two biggest manufacturing companies of Android-based phones.

“All modern operating systems include many patented technologies,” said Microsoft in a statement in regards to the Barnes & Noble issue. “Microsoft has taken licenses to patents for Windows and we make our patents available on reasonable terms for other operating systems, like Android. We would be pleased to extend a license to Barnes & Noble.”

Barnes & Noble sold $800 million worth of Nook readers in the 2011 fiscal year. The company forecasts those sales to double this year to $1.8 billion. This would amount to 24% of the company’s revenue. This case has been filed under “In the Matter of Certain Handheld Electronic Computing Devices, 337-769, U.S. International Trade Commission (Washington).”

The Nook Tablet has double the internal storage and the RAM compared to the Amazon Kindle Fire. However Barnes & Noble does not have the advantage that Amazon.com has. Amazon.com is one of the most visited websites in the world and I bet that the Kindle Fire will have prime real estate advertising on Amazon’s website.

[AnnArbor.com]