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TechCrunch broke the news, claiming it had acquired internal documents that revealed not only Microsoft's offer, but also plans to phase out Nook's Android-based tablets by the end of 2014. An anonymous source told The New York Times that the documents are authentic and only a few weeks old. According to the Times, which noted that Nook was valued at $1.8 billion as recently as December, it is not yet clear if a deal will be closed. Microsoft has so far declined to comment, but the Times source claimed any announcements are at least weeks away.
To an extent, Microsoft's ostensible interest in e-books is a natural evolution. It invested $300 million in Nook Media in April 2012, and Microsoft VP Andy Lees asserted that his company saw great potential in the partnership.
"Our complementary assets will accelerate e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them," he said at the time. "We're at the cusp of a revolution in reading."
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What the alleged revolution entails is still far from clear. To date, Microsoft's investment has produced only a Nook app for Windows 8, as well as occasional rumors that e-books could play a headline role in future Surface devices.
Nook took a beating during the holidays, slashing prices in the face of increased consumer preference for devices such as Apple's iPad and Amazon's Kindle Fire. Even so, the Barnes & Noble e-book ecosystem still boasts millions of users. Microsoft remains a dominant force in the enterprise but has struggled to find similar success among consumers, outside of its Xbox business. Redmond could perceive Nook as a useful asset as it attempts to rectify this imbalance.
TechCrunch reported that once Nook hardware is discontinued, the company will distribute e-books via third-party apps. Which platforms will be privy to these apps is not yet clear. But even if Microsoft opens Nook to iOS and Android -- and doing so could certainly be profitable -- the software giant could still tailor its acquisition to drive Windows sales.
The education market, for example, is shifting from physical books to tablets, and a Nook-optimized Windows 8 device could serve this market well. Even before the rumor broke, Microsoft's internal apps team was reportedly working closely with its Nook counterpart, suggesting that even if Barnes & Noble's e-books are available on all platforms, the Windows version might offer a differentiated, premium experience.
Windows 8 still trails iOS and Android in total mobile apps, and though Microsoft has made recent progress in this regard, it still lacks a killer title to differentiate it from the competition -- i.e., Windows 8's version of Halo. The fact that Microsoft will soon offer a complete OS at the iPad Mini's price point could persuade consumers to join the Win8 bandwagon, but a well-executed Nook tie-in has potential of its own.
There have also been indications that Nook might hook into Microsoft Office, perhaps allowing users, for example, to publish to an online bookstore directly from a Word document. This sort of synergy could benefit Redmond in multiple ways. Though some users view older versions of Office as adequate for their needs, Microsoft has added features -- ranging from Bing apps to its Office 365 subscription model -- to compel customers to upgrade. The strategy has already paid off, and if Nook is integrated into the mix, the product suite's appeal will only be enhanced.
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