Microsoft Enters e-Book Reader Market

Tech giant Microsoft is entering the e-book market to compete head-in with Amazon.

Microsoft is said to be investing US$305 million in Barnes & Noble. Reports indicated that the tech giant is interested in the book retailer’s e-reader and university business. The investment also means Microsoft is getting a 17.6 percent stake in those businesses.

Microsoft’s investment in the e-reader industry follows its announcement of launching its Windows 8 operating system and the addition of Barnes & Noble’s Nook app on Windows tablet.

McAdams Wright Ragen analyst Sid Parakh said that Microsoft’s move would allow the company to gain market share in the e-reader business. Parakh added that the market is consistently growing and it is in Microsoft’s best interest to enter that industry.

Observers also note that that the market for downloadable university textbooks is growing significantly and that the publishing industry is undergoing a major shift from printed to electronic distribution.

The announcement of Microsoft’s investment appears to be welcomed by Wall Street. Barnes & Noble shares grew 60 percent.

According to William Lynch, Barne & Noble’s chief executive, the tech giant’s investment would fund the worldwide rollout of Nook digital stores and the development of the new reading software using Windows platform.

Under the investment plan, Microsoft will pay Barnes & Noble US$25 million annually in the next five years. The deal also includes an upfront annual payment of US$60 million. The upfront payment covers the first three years after Windows 8 launch. Overall, Microsoft’s total investment amounts to at least US$605 million.

The investment gives Barnes & Noble a much-needed boost. It currently has a 27 percent market share of the US e-book market. Apple holds 10 percent while Amazon enjoys 60 percent.

Tagged Amazon, Barnes & Noble, Microsoft, Sid Parakh, William Lynch