Microsoft buys into Barnes & Noble's Nook.

Microsoft is buying into Barnes & Noble by investing $300 million into its e-reader “Nook,” and forming a new combined company.

Barnes & Noble has seen Nook as a major component of their business strategy, but had said previously that it was exploring strategic options—essentially an “open house” sign for potential investors and buyers.

As partners, Microsoft and B&N will settle their patent disputes, and Barnes & Noble will produce a Nook e-reading application for the new Windows 8 operating system, which will run on traditional computers and tablets.

Nook’s major competition is both the Amazon Kindle and Apple’s iPad—both with greater market share, and share of voice. Opening the Nook market into the Windows 8 world of traditional computers may be a big boon for the company.

The New York Times Dealbook reports that the Nook division’s growth has come at enormous financial cost, weighing down on Barnes & Noble’s bottom line and prompting the strategic review.

William J. Lynch Jr., Barnes & Noble’s chief executive, said in a statement, “our relationship with Microsoft are important parts of our strategy to capitalize on the rapid growth of the Nook business, and to solidify our position as a leader in the exploding market for digital content in the consumer and education segments.”

The new company that will be formed between the two companies has yet been named. 

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