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’s Award-Winning $199 NOOK Color Now Even Better with Streaming Entertainment and More Breathtaking Content in VividView

NEW YORK–(BUSINESS WIRE)–Barnes & Noble, Inc. (NYSE: BKS), the leading retailer of content, digital media and educational products, continues to enhance its critically acclaimed NOOK Color with the largest-ever software update to the device now available at no cost (www.nookcolor.com/update), adding over 100 feature enhancements, access to top video and music services, popular apps, comics and more. With new tablet features and access to the best names in entertainment, the first-ever Reader’s Tablet™ is now even better at the incredibly low price of $199. Customers can enjoy popular movies and TV shows through leading services like Netflix and Flixster, with others coming soon. The update also brings faster, easier access to the world’s largest digital catalog of color and interactive books, magazines, children’s books, high-quality apps, and now comics and graphic novels.

The perfect holiday gift for those who love to experience all types of content in rich, beautiful color on the world’s most advanced VividView™ display, NOOK Color is available for new customers to purchase immediately in NOOK Digital Shops™ at their neighborhood Barnes & Noble stores, www.nookcolor.com and other leading retailers. Today only, customers who purchase any new $199 NOOK Color online with a MasterCard will receive a free $25 Barnes & Noble Gift Card, along with free shipping. This offer also applies to the #1-rated $99 NOOK Simple Touch™, and the all-new $249 NOOK Tablet™, the company’s fastest, lightest tablet with the best entertainment displayed in stunning VividView. Additional details are available at www.nook.com.

“Building upon our award-winning reading experience and vast digital content catalog, we are excited to offer our largest NOOK Color software update ever that will bring access to movies, TV shows, hundreds of new apps, comics, graphic novels and more to our time-tested, critically acclaimed Reader’s Tablet,” said William Lynch, Chief Executive Officer of Barnes & Noble. “This innovative product continues to receive high acclaim as an Editor’s Choice and is ranked among the most highly rated eReaders by many leading technology reviewers. At the incredibly low price of $199, customers can discover all types of interactive content specifically designed for the stunning, 7-inch display, in addition to staying connected through email and the web. We encourage customers to stop by their local Barnes & Noble this holiday season to learn about the whole portfolio of NOOK devices and receive free support from one of our highly-trained NOOKsellers.”

More High-Quality NOOK Apps™, Including Top Entertainment Services

Adding to the growing collection of high-quality NOOK Apps, children’s apps, games and more, NOOK Color customers can download Netflix to watch movies and TV shows, and Flixster which, through the UltraViolet™ standard, will allow consumers to access their digital movies and TV shows on the go. Coming soon, more leading services will be available. NOOK Color owners can also listen to millions of songs using the hottest music services, including Pandora, Rhapsody®, Grooveshark and MOG, all available with a free 14-day trial. In addition, NOOK Color owners can listen to their own songs wherever they go with the built-in music player. From music to movies and more, all NOOK Apps are the highest-quality versions available, optimized for NOOK Color’s beautiful and ultra-responsive 7-inch VividView display to ensure a stunning and seamless user experience.

The NOOK App library continues to grow with hundreds of new titles added each week to bring all the top requested and most popular apps to both NOOK Color and NOOK Tablet. Exciting new NOOK App additions include games published by Chillingo such as Roll in the Hole and Spider Jack, I Can Read, Cozi Family Organizer, Audobon Insects, Pat the Bunny, and more. Enjoy fun new holiday-themed apps including How the Grinch Stole Christmas!, The Berenstain Bears’ Christmas Tree, Rudolph the Red-Nosed Reindeer, and Tacky’s Christmas – all with a special reduced pricing promotion for the holidays. Also, find All I Want from Santa, Emma In: A Sweet Christmas plus an extensive lineup of holiday-centric live wallpapers, themes and much more.

Barnes & Noble’s Vast Collection of Interactive Content at Your Fingertips

NOOK Color customers can shop the world’s largest bookstore, featuring more than 2.5 million books, enhanced books, interactive magazines, newspapers, children’s books, and now comics and graphic novels. Highlights include:

NOOK Newsstand™: Choose from more than 300 newspapers and full-color, interactive magazines, delivered instantly to the device. Barnes & Noble offers the largest digital collection of top 100 magazines for subscription or single issue purchase – all available for a risk-free, 14-day free trial – including bestsellers PEOPLE, Food Network Magazine, Us Weekly, SPORTS ILLUSTRATED, TIME, National Geographic and many others. Most interactive magazines offer Barnes & Noble’s ArticleView™, new animated and lightning fast page turns, smooth pinch, zoom and panning. Many special edition NOOK Magazines™ feature videos, animation, image galleries and more. Newly added publications include People StyleWatch, Southern Living, SmartMoney, Official Xbox Magazine, WIRED, SELF and TransWorld Skateboarding with more titles being added each week.
New NOOK Comics™: NOOK Color customers can now access a large collection of full-color comics, graphic novels and kids’ comics in high resolution that allow readers to pinch, zoom and discover this content like never before. NOOK Comics features the largest digital collection of Marvel’s graphic novels available through a third party – including Halo Uprising and other Marvel greats like Ultimate Spider-Man, The Astonishing X-Men, and Hulk: Planet Hulk, among others. NOOK Color customers can also enjoy titles from other leading publishers, including Archie – with series starring the redheaded star, plus pals Jughead and Betty & Veronica– IDW and Dynamite.
NOOK Kids™: With an incredible collection of more than 1,000 interactive children’s picture books and more than 12,000 chapter books, NOOK Color offers the world’s largest digital selection with hundreds of titles offering enhanced Read to Me and Read to Play functionality, so children and parents can interact with built-in narration and engaging in-page animation and activities. Newly added popular titles for the holidays include A Charlie Brown Christmas and Elf on the Shelf, both only on NOOK with engaging narrations and entertaining activities built right in to the stories, plus an exclusive edition of Sandra Boynton’s Christmas Parade, narrated by the author. Beginning readers can also enjoy new I Can Read series titles, plus Judy Blume’s popular Fudge series including Tales of a Fourth Grade Nothing and many more through the expanded chapter book collection.
NOOK Books™: Barnes & Noble continues to expand its NOOK Bookstore™ with the vast majority of books available for $9.99 or less. New PagePerfect™ NOOK Books™ feature cookbooks, craft and art books rendered with rich precision to retain all the beauty of their stunning print versions. Customers can also enjoy new titles including 11/22/63 from Stephen King and Happy Accidents by Jane Lynch, or bestsellers including Explosive Eighteen by Janet Evanovich, Paula Deen’s Southern Cooking Bible, Inheritance by Christopher Paolini, The Girl with the Dragon Tattoo by Stieg Larsson and many more.

Enhanced Reading Experience Makes it Easier than Ever to Find New Great Content

NOOK Color customers can now explore new reading experiences and Shop enhancements that make it easier than ever to find great books, children’s content, magazines, newspapers and apps. Simply tap to open the redesigned NOOK Store to find a clean, customized interface and great social features that showcase the vast amount of content available. Explore customized reading features to enjoy all your favorite content like never before.

Customized reading: In response to customer feedback, NOOK Color now offers the flexibility to read books in portrait or landscape mode and to adjust the text with even more font sizes to choose from. And now reading is even more interactive with PDF thumbnail page views, and image pinch, zoom and pan in books and PDFs.
Unparalleled reviews and recommendations: Learn what to read next from Barnes & Noble’s knowledgeable booksellers, from new releases to up-and-coming authors. Barnes & Noble’s personalized NOOK Recommendations™ suggest titles by customer’s favorite authors in many different categories – helping them find selections in all subjects, from the most popular to hidden gems. In any book a customer is reading, a simple tap on the new NOOK Discover™ icon offers instant recommendations. Customers can also find new content through:
NOOK Daily Find – Discover a new read every day at an amazing price.
NOOK First – Exclusive content for NOOK owners from leading authors.
NOOK Snaps – Bite-size reads for “snackable” content on the go.
NOOK Spotlight – Twice a month, Barnes & Noble features great books at a great price.
New Release Tuesday – The weekly scoop on the bestsellers and the newest releases.

Get more social: With NOOK Color, customers can connect with Facebook friends and others through NOOK Friends™, and find out what they have to say about their books, magazines and newspapers. Customers can also share their thoughts about the books they’re reading via email, Facebook and Twitter. Owners can share books, as well as browse and borrow books, from NOOK Friends using Barnes & Noble’s exclusive LendMe® technology.
Continuous reading: Read what you love, anywhere you like™ on NOOK devices and with free NOOK Reading Apps. NOOK Cloud™ automatically syncs a customer’s library, last page read, bookmarks, notes, and highlights across all of their devices, so a customer can start a book on NOOK Color, and pick right back up where they left off on their computer or smartphone.’

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).”

[AnnArbor.com]