Microsoft Corporation (NASDAQ:MSFT) is considering the acquisition of Nook Media for $1 billion as part of a plan to gain full access to the company’s line of e-readers, tablets, and e-books. The acquisition details are cited in internal documents obtained by TechCrunch. Microsoft previously invested $300 million in Nook. Nook Media LLC is a joint venture between Barnes & Noble and several other investors.
As part of the plan, Microsoft would receive preferred units in Nook Media, which would include a college book division. The documents reveal that Nook Media is planning to discontinue their Android-based tablet business by the end of the 2014 fiscal year. They will be transitioning to a model where Nook content will be distributed through apps on third-party partner devices.
The documents do not indicate whether the third-party tablets will be Microsoft’s Windows 8 devices or tablets made by competing platforms. The third-party tablets are supposed to get introduced in 2014.
As part of Microsoft’s $300 million investment in Nook Media, it included an additional $180 million advance to develop content for Windows 8 devices. Back in March, Nook announced that people that download their app on the Windows 8 operating system comes can get five books and five magazines free of charge.
Over 10 million Nook devices have been sold and they have over 7 million active subscribers. The Nook app is available on Android, iOS, and Windows.
The documents also revealed that the Barnes & Noble’s retail operations are valued at $1.66 billion. When Nook Media was created, the valuation of that division was given a $1.7 billion valuation. Even when Pearson invested $85 million for a 5% stake in January, Nook Media was valued at around $1.8 billion. If this deal happens, then Microsoft would pay well below the price that they originally bought in at.
Nook Media brought in $1.215 billion for the fiscal year 2012 at a loss of $262 million in EBITDA. Revenues are expected to fall to $1.091 billion in the fiscal year 2013 with a loss of $360 million as the tablets are phased out.
[Image Credit: Nook.com]