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What Microsoft Gets From the Barnes & Noble Deal

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The tech giant is sinking a whole lot of cash -- $600 million at last count -- into Barnes & Noble.

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MINYANVILLE ORIGINAL Microsoft (MSFT) gave Barnes & Noble (BKS) $300 million on Monday. Actually, if you count all the revenue guarantees, and some cash for development of its international content, it will give the bookseller $600 million over the next few years, according to the Wall Street Journal. As if the deal needed sweetening, Microsoft dropped a pesky patent suit against Barnes & Noble, too.

That's a lot of dough for a money-losing book shop, noted investors, as they bid Barnes & Noble's stock up by 51.68% in a day, to $20.75.

Microsoft got a lousy $0.04 per share, closing at $32.02 Monday. .

So, what else does Microsoft get out of the deal? It gets a 17.6% stake in a new Barnes & Noble division that will be dedicated to the Nook e-reader device and its very substantial catalog of downloadable books, magazines, and college textbooks.

Microsoft also gets a Nook app to bundle with every Windows device. It ought to get some floor space in Barnes & Noble's bookstores, too, to show off its Windows and Xbox products alongside the Nook display.

Neither of the above sounds like much, but it gets Microsoft a plain-English answer for consumers who ask why they would buy a Windows 8 device.

Put it together with Microsoft's earlier deal with Nokia (NOK), and it sounds like a plan. A company that has had no measurable impact on the mobile devices market suddenly has the potential to be a significant player in both smartphones and e-readers.

There's isn't even a hint in the announcement that Barnes & Noble will drop Google's (GOOG) Android operating system for Microsoft Windows, although maybe it didn't feel it needed to say that there will at least be a Windows version of Nook, and soon.

Microsoft, Nokia, and Barnes & Noble have a lot in common: All were once dominant in their respective spaces, and have fallen on hard times. But none of them are dead yet. At the very least, this troika will be fun to watch.

They're working hard, too. Real numbers are hard to pin down, but Amazon (AMZN) is believed to have about 60% of the market for both e-readers and downloadable e-books. Barnes & Noble's Nook probably has half that, after a year-end push in 2011 that increased its Nook sales by 38%.

As for Nokia, it recently released its Lumia 900 phones with Windows 7, to strong reviews. No sales figures are in yet, but here's one positive note: PC World says the phone carriers are positively "desperate" to carry Windows 8 phones. It seems they're sick and tired of kowtowing to the all-powerful Apple (AAPL).

The timing is right for Microsoft. Windows 8, the totally revamped and mobile-ready version of the Microsoft operating system, is due to be released this summer.

It's a whole lot of money for a bet on the future, unless you're Microsoft, which has about $60 billion more in the bank to play with.

Web Weekly In Brief:

Facebook's Valuation Math
If Facebook is valued at $100 billion, as it is expected to be when it goes public, then each of its nearly one billion members must be worth roughly $100 to the company. But the social network currently earns only $4.84 in revenue per user annually, or about $1 in profit.

That interesting bit of mathematics is done by Will Oremus, technology columnist for Slate.com. He also cites some comparable numbers, like the amount Facebook just paid for Instagram. At $1.3 billion, that works out to $25 to $30 per user.

Of course, these numbers say nothing about Facebook's plans for future revenue growth, except that they'd better be really good.

Groupon Improves Math Skills
In the wake of its "restatement" of its quarterly revenue, Groupon (GRPN) is adding a couple of guys who can definitely do math to its board of directors. David Henry, finance chief of American Express (AXP) and Robert Bass, vice chairman of Deloitte LLP, will become Groupon directors and will serve on the audit committee, a company statement said. Groupon's stock has skidded 42%, to under $11 a share, since it corrected its earnings statement downwards on March 30.

RIM Buys Rent-a-Mob
Research in Motion (RIMM) has revealed that it was the sponsor of a staged flash mob "scene" at an Apple store in Sydney, Australia. The event got wide publicity as an apparent anti-Apple protest, since the black-clad participants held up signs reading "Wake Up." The maker of BlackBerry phones said the event was one in a series of "experiential activities" in Australia that are intended to get people talking about its upcoming BlackBerry 10 update.

It's not precisely sleazy, but it's sort of pitiful, no?
Position in MSFT.
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