Microsoft Exits Nook Investment Troubled From Day One

Microsoft Corp. is selling back its stake in Barnes & Noble Inc.’s struggling Nook electronic-reader business for about $180 million less than it paid, as Chief Executive Officer Satya Nadella unwinds unprofitable projects.

Nadella, who took over the software maker in February, has been working to streamline Microsoft by trimming some of former CEO Steve Ballmer’s initiatives and investments. The $300 million Nook investment, made in 2012, was troubled from the outset, with persistently poor demand, competition from Amazon.com Inc.’s Kindle, mounting losses and no clear strategy.

Microsoft, based in Redmond, Washington, bought into Nook as it sought ways to secure content and programs for its Windows 8 computer-operating system. Some executives didn’t want to rely entirely on Seattle-based Amazon, which competes with Microsoft in other areas like cloud computing, for books and reading applications. The deal was the only one put together by former acquisitions chief Andy Lees during a short tenure overseeing strategy and corporate development.

Nadella hasn’t been shy about reversing some of Ballmer’s plans. As he tries to cut costs and focus the company around mobile and Internet-based software, he has fired workers, shuttered an original TV content studio and canceled a smaller version of the Microsoft Surface tablet shortly before it was set to ship.

Microsoft will receive $62.4 million and Barnes & Noble shares worth about $60 million based on yesterday’s close for the stake, according to a filing today. Under the terms of the deal, Microsoft, which also made some additional payments after the initial investment, will be freed from future investments that were part of the earlier accord. The software maker is also entitled to a contingency payment for future dividends, distributions or other transactions involving Nook.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE