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    Monday, April 30, 2012

    Reuter site - Microsoft buys Nook stake, Barnes & Noble shares soar

    This article was sent to you from bombastic4000@yahoo.com, who uses Reuters Mobile Site to get news and information on the go. To access Reuters on your mobile phone, go to:
    http://mobile.reuters.com/article/technologyNews/idUSBRE83T0E120120501

    Microsoft buys Nook stake, Barnes & Noble shares soar

    Mon, Apr 30 20:49 PM EDT

    By Phil Wahba and Bill Rigby

    NEW YORK/SEATTLE (Reuters) - Microsoft Corp is jumping into the fast-growing e-books market by investing $605 million over five years in Barnes & Noble Inc's Nook e-reader and college business, as it looks to unlock Amazon.com and Apple Inc's grip on the exploding tablet computer market.

    The move comes just six months before the world's largest software maker is due to launch its new touch-enabled Windows 8 operating system, and the inclusion of a Nook app on Windows tablets should allow them to compete with Apple's iPad and Amazon's Kindle Fire.

    It also gives Microsoft a direct interest in electronic publishing just as the market for downloadable college textbooks starts to take off and the publishing industry undergoes a radical shift toward electronic distribution.

    "It's a good strategic deal," said Sid Parakh, an analyst at fund firm McAdams Wright Ragen. "It gets Microsoft in the game for e-readers, and gives them access to a market that has been growing nicely and they've basically sat out of. It also makes Windows 8 a more compelling platform from an e-readers perspective."

    In turn, Barnes & Noble gets a much-needed capital injection and a way to enter the digital books market outside the United States. The new unit will be run and majority owned by Barnes & Noble and will maintain a relationship with the U.S. bookstore chain's nearly 700 stores.

    Shares of Barnes & Noble soared as much as 90 percent in early trading, before sliding back and ending with a 52 percent gain at $20.75. Microsoft shares, which recently hit a four-year high, edged up 0.1 percent to close at $32.015.

    Microsoft's initial investment of $300 million, which will give it a 17.6 percent stake in the newly created Barnes & Noble subsidiary, values the new unit at $1.7 billion. Over the next five years, Microsoft has committed to invest another $305 million.

    The deal - initially worth only 0.5 percent of Microsoft's cash hoard - is financially small, but strategically important for both companies.

    Microsoft's Windows software still runs on more than 90 percent of the world's personal computers, but the company has been left behind in the mobile revolution as millions of people do more computing on smartphones and tablets running Apple or Google's Android software. Microsoft has also struggled to make its mark on internet-based commerce, which is dominated by Amazon, or rival Apple and Google's online app stores.

    "The deal brings Microsoft technology and engineers into the Nook business - that talent will be tapped to make the Nook even better," said Albert Greco, a book industry expert at the business school of Fordham University in New York. "It gives Microsoft a tablet already, and Barnes & Noble global reach for the Nook platform, through Windows 8."

    Barnes & Noble Chief Executive William Lynch told Reuters that the investment would go primarily to fund the international rollout of the Nook's digital bookstores and new reading software for the Windows platform.

    MICROSOFT BACKS ANDROID

    Under the deal announced early on Monday, Microsoft will get a 17.6 percent stake in a new Barnes & Noble unit combining the bookseller's college bookstore and Nook businesses. Those areas made up just over $1 billion in sales last quarter, about 40 percent of Barnes & Noble's total.

    Microsoft, which will get an unspecified share of the new unit's sales, will pay $25 million a year for the first five years to help with development costs and acquiring content, and will make an upfront payment of $60 million a year for the first three years after the launch of Windows 8, essentially guaranteeing minimum sales of that amount to Barnes & Noble.

    That means Microsoft's total outlay will be at least $605 million.

    As part of the deal, Microsoft has dropped a patent lawsuit against Barnes & Noble over the Nook, which runs on Google's Android system, and will get royalties on those patents. There is a possibility that future Nook models will be based on the Windows operating system, but executives would not comment on that in a call with analysts.

    Barnes & Noble gets a much-needed capital injection and a way to enter the digital books market outside the United States. The new unit will be run by Barnes & Noble and will maintain a relationship with the U.S. bookstore chain's nearly 700 stores.

    Barnes & Noble's Nook has found a strong following, allowing it to garner some 27 percent of the U.S. e-books market in the 2-1/2 years since the device was launched, compared with Amazon's 60 percent and Apple's 10 percent. But battling Amazon's market-leading Kindle has proved expensive.

    "It gives them a much larger partner with deeper pockets, it gives them increased reach," said Morningstar analyst Peter Wahlstrom. "In the last two years they've had their backs against the wall."

    Last year, Barnes & Noble suspended its dividend to direct more cash into developing Nook, which resulted in a well-reviewed glow in the dark Nook introduced last month.

    In January, however, it lowered its sales and profit forecasts as it faces pressure from Amazon's aggressive pricing strategy which has prompted it repeatedly to lower the prices on its own devices.

    NOOK TO GO GLOBAL

    Barnes & Noble has poured tens of millions of dollars into developing the Nook. The first version hit the market in 2009, two years after the Kindle.

    The company's e-readers, tablets and electronic book sales have helped it offset a broader decline in book sales. Same-store sales of books at its brick-and-mortar stores have edged up again largely thanks to the bankruptcy last year of Borders Group.

    But the Nook has been available only in the United States and the company said last year it wanted to take its digital business to new markets. Lynch told Reuters that deals to sell Nook through retailers abroad were "coming soon."

    Barnes & Noble said in January that it might spin off its digital business, which includes the Nook, arguing that investors were not giving the company enough credit for that growth.

    The company did not say on Monday if it would take the new venture public.

    Barnes & Noble put itself up for sale in 2010 but attracted only one firm offer - a bid for $17 per share, or $1 billion, last May, from Liberty Media, which was drawn by the Nook's growth.

    Liberty ultimately decided to invest $204 million rather than buy the company outright. It now has preferred shares it can convert into a 16.6 percent stake in Barnes & Noble at a strike price of $17.

    (Reporting by Phil Wahba, Martinne Geller and Sinead Carew in New York and Bill Rigby in Seattle; Additional reporting by Mihir Dalal in Bangalore and Alistair Barr in San Francisco.; Editing by Lisa Von Ahn, Maureen Bavdek, Dave Zimmerman and Matthew Lewis)

    Reuter site - It's not a BlackBerry World anymore

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    It's not a BlackBerry World anymore

    Mon, Apr 30 17:26 PM EDT

    By Alastair Sharp

    ORLANDO, Florida (Reuters) - When Mike Lazaridis and Jim Balsillie were running Research In Motion, BlackBerry World was a chest-thumping celebration of RIM's successes and a showcase for the innovations that would assure its continued dominance.

    Their successor Thorsten Heins will preside over a very different event.

    Three months after replacing the longstanding co-CEOs, Heins desperately needs more time to right the now-struggling company and he likely has next to nothing concrete to offer his restless audience in terms of new products and services.

    In late March, Heins embarked on a strategic review of the Canadian smartphone maker's direction in an effort to reverse the growing power of Apple Inc and Google Inc's Android, and to thwart a budding Microsoft/Nokia resurgence.

    The company is working furiously to get a next-generation lineup of smartphones on sale, while also seeking licensing deals, partnerships and cost savings of $1 billion this year.

    Unless Heins has a big surprise up his sleeve at this year's BlackBerry World, held next week in Orlando, Florida, analysts expect him to focus on products and services already in market. Most of them have so far failed to capture the imagination of investors or consumers.

    "It's too early in RIM's strategic review process to announce one particular strategy," IDC analyst Kevin Restivo said. "However, Heins would be wise to provide any kind of news to help staunch the bleeding."

    Restivo expects RIM to tout any progress it's made in attracting developers and possibly announce a PlayBook that connects to cellular networks. That would make the 7-inch tablet more portable and give carriers an incentive to promote the device.

    PRESENTATION DELAYED

    BlackBerry World - which brings together several thousand RIM partners and customers - was once a must for financial analysts. But this year few are making the trip, in part because RIM has broken with tradition by cancelling a specific presentation for them. Instead it delayed the briefing until the next-generation BlackBerry 10s are on sale, sometime later this year.

    In the year since RIM's last Orlando conference, the company has issued a string of disappointing financial results, suffered an embarrassing global network outage and watched its share price tumble by 75 percent.

    Lazaridis and Balsillie quit under pressure in late January, replaced by Heins, a former Siemens AG executive who ran RIM's hardware business for several years.

    "Expectations are so low I don't think it's possible to disappoint investors," said National Bank Financial analyst Kris Thompson. "The conference isn't for investors anyway; it's for customers, developers and partners."

    Thompson said RIM may use the event to introduce a marketing chief, which he said was long overdue. RIM is also seeking a chief operating officer.

    "The company needs to display confidence and staying power at the show to keep this constituency loyal until the BlackBerry 10 smartphones are launched," he said.

    Other RIM watchers privately pointed to subdued comments from a major investor and new board member last week as a hint not to expect much. Prem Watsa, who joined RIM's board in January's reshuffle, said that a turnaround could take three to five years.

    LOOKING AHEAD

    The BlackBerry 10 devices will be RIM's first smartphones to make use of a hardy operating platform from QNX Software, an Ottawa, Ontario-based company that RIM acquired in 2010.

    RIM's first test of QNX was its PlayBook tablet, which has languished on store shelves since its launch a year ago. The company is eager to get software developers to build PlayBook applications that could then populate an app store for the new phones.

    On the sidelines of BlackBerry World, the company will hand out a prototype BlackBerry 10 device for developers to test their software applications. RIM has stressed that the device's hardware bears no relation to the finished product.

    The BlackBerry was once seen as an indispensable business tool but has been eclipsed by more consumer-focused iPhones and Android devices which boast large, vivid touchscreens and hundreds of thousands more applications and games.

    RIM had an 8.8 percent slice of the global smartphone market in the fourth quarter, according to research firm Gartner, down from 14.6 percent a year ago. Apple and Android smartphones accounted for almost three-quarters of the market, up from less than half a year earlier.

    Meanwhile, a partnership between Microsoft Corp and Nokia Oyj threatens both RIM's corporate heartland and its recent growth markets internationally.

    By the time RIM launches its first BlackBerry 10s, its global share could slip to 6 percent, analysts at Canaccord Genuity said in February. They said the small base would make it difficult for RIM to create an ecosystem of applications and content for its new platform.

    Recognizing it is powerless to stop iPhones and Android devices from invading its once-impenetrable corporate and government business, RIM launched its Mobile Fusion software to enable IT managers to control those devices through RIM's servers. But it has so far failed to go further.

    Sources told Reuters last month that former co-chief executive Balsillie had worked for months on a radical shift in RIM's strategy that would have offered use of its proprietary network, including its popular BlackBerry Messenger chat program, for rival devices such as the iPhone.

    Heins has since said he believes in RIM's integrated model - in which it runs its own software on its own devices connected exclusively to its global peer-to-peer network - but that he would consider offering that via partnership.

    (This version of the story has been corrected in the third paragraph to change period to three months from five months)

    (Editing by Frank McGurty)

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