First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.
$US300m investment in Nook delivers next to nothing for Microsoft
- — 07 May, 2013 18:04
Microsoft has gotten little from a 2012 investment of $US300 million with Barnes & Noble, analysts said, but it's poised to reap some rewards as it and its partners start to ship smaller tablets.
On April 30, 2012, Microsoft and the bookseller announced a new co-owned subsidiary that included Barnes & Noble's Nook business. Microsoft's contribution was a $300 million investment, a relatively small amount for the Redmond, Wash. developer, which spent $8.5 billion in 2011 for Skype.
The investment brought Microsoft a 17.6 per cent stake in the new company, which was given the name Nook Media LLC last October after several months of using a generic placeholder, NewCo.
Other parts of the agreement guaranteed Barnes & Noble an additional $US305 million from Microsoft over the following five years, settled the patent litigation between the two companies, and promised royalty payments to Microsoft from Barnes & Noble's Nook e-readers and tablets.
A year into the deal, Microsoft has little to display.
"They've gotten nothing up to now," said Carolina Milanesi, an analyst with Gartner, in a Monday interview.
When the collaboration was unveiled last year, experts speculated that it might lead to a Windows-based e-reader or tablet powered by Windows 8 or Windows RT, the two new operating systems that at the time were six months in the future. That did not happen.
A Nook app for the new OSes - designed for the tile-style "Modern" user interface (UI), formerly "Metro" - was promised when the deal was signed. While many, including IDC analyst Bob O'Donnell, expected that app to debut alongside Windows 8 and Windows RT, it didn't hit the Windows Store until early February -- about three months after the operating systems reached retail.
Except for that app, there have been few outward signs of a payoff for Microsoft. But experts cautioned against rushing to judgment.
"This was more an investment in an organization," said O'Donnell. "How that continues to play out we'll just have to see."
"It's a lot like other investments Microsoft's made. It will take a while to come to fruition," echoed Wes Miller of Directions on Microsoft, a Kirkland, Wash. research firm that focuses exclusively on Microsoft's moves.
That fruition may come soon.
Microsoft's loosening of Windows 8 certification requirements in March will lead to smaller, less-expensive tablets powered by the OS, the kind that are much better suited to e-reading than the current crop of 10-in. and larger tablets, like Microsoft's own Surface RT and Surface Pro.
"Looking at form factors, the 7-in., 8-in. tablet is a great form factor for consumption," said Milanesi. "With that size and Windows RT, Microsoft could do more with books, or with Xbox from a content gaming perspective."
Miller concurred. "The e-reader is rapidly devolving into a small tablet," he said, pointing to plummeting sales of the former -- a factor that has most experts writing the category's obit -- and increasing sales of the latter, such as Amazon's Kindle Fire.
Whether Microsoft joins OEMs and produces a smaller Surface of its own -- dubbed "Surface Mini" by wags in a nod to Apple's nomenclature -- or leaves the smaller tablet market to its partners, the Nook Media collaboration could pay dividends in that market, both Milanesi and Miller said.
Other questions were raised about the Microsoft investment recently when Barnes & Noble announced it was adding Google Play, Google's Android app marketplace, to the upper-end Nook HD and Nook HD+ devices, tablet-like e-readers discounted this week to $149-$179 (Nook HD) and to $179-$209 (Nook HD+).
Adding the app store to those e-readers, which are powered by a modified version of Google's Android, was a slap to Microsoft's face, pundits argued.
Perhaps, said Miller, but he didn't see how Barnes & Noble, or more accurately, Nook Media, could have done anything different. "Their hand was forced," Miller said, explaining that as e-readers battle true tablets, their only hope is to add more tablet characteristics. And apps is at the top of that latter list.
"They couldn't hold to this magic line any longer," Miller said, referring to the previous stance where, though Nook HD and Nook HD+ were essentially Android devices, they omitted the Google Play app store. "They surely looked at how they had already invested in their Android devices and proceeded with Android [and Google Play] because that's what they had. They couldn't do a Windows tablet because their hands were tied. They have to wait until Blue."
Microsoft may have not been happy at the decision by Nook Media to bow to reality and include Google Play, said Miller, but because that move was made, it's evident that Microsoft has accepted it, or been forced to: Microsoft, after all, is only a minority partner in the Barnes & Noble subsidiary.
"It's definitely possible that [Nook Media] will do a Windows tablet, but those are cards we can't see," Miller noted.
This article, $300M investment in Nook delivers next to nothing for Microsoft, was originally published at Computerworld.com.
Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is email@example.com.
Read more about tablets in Computerworld's Tablets Topic Center.