Microsoft-Barnes & Noble deal could lead to Windows-based tablet

Computerworld - Microsoft's new partnership with Barnes & Noble could lead to development of a Windows-based tablet or e-reader, not just a Nook e-reader application for Windows 8, some analysts believe.

The operating system for such a tablet or e-reader could be Windows 8, Windows RT, or even Windows Phone 8, analysts said Monday. Both companies confirmed that a Nook application for Windows 8 is planned, but officials were vague about whether the two companies would develop a Windows e-reader or a tablet, which would likely involve a third-party tablet maker.

Whatever version of a Microsoft operating system would be used, the two companies hope to mine enormous potential revenues from e-books, especially from the relatively untapped market for college e-textbooks, said Allen Weiner, an analyst at Gartner, in an interview.

Microsoft might also hope to tie in Skype videoconferencing to develop a social connectivity tool for e-book readers, said Jack Gold, an analyst at J.Gold Associates, noting that such a tool would enable students to, say, confer with one another on a college microbiology text. Microsoft's Bing search engine could add more value to such an offering, he said.

Microsoft will invest $300 million in a new Barnes & Noble subsidiary, which will include the digital Nook and college businesses of Barnes & Noble.

In two years, the global market for college textbooks -- which are primarily still published in paper form -- will reach more than $4 billion, meaning there's great potential for companies that want to get involved in sales of e-textbooks, Weiner said. "That market's pretty open, and Barnes & Noble owns 135 college textbook stores already, so they're in an incredible position in the textbook market," he said.

Moreover, Amazon has not shown much interest in e-textbooks, Weiner added.

If the new partnership develops a Windows-based tablet or e-reader, the device would likely give college students and other users the ability to use Microsoft Office apps that either aren't available or aren't fully usable on Apple's iPad, Weiner added.

"I don't think the iPad is a killer device for education users, so running Windows with productivity software and Barnes & Noble, with its really good relationships with publishers and college distribution, could be really interesting," Weiner said.

Microsoft could even be eyeing the possibility of developing some kind of reader device as part of its partnership with Nokia. Such a device would likely be based on the Windows Phone 8 operating system, also called Apollo, or a future variation of Windows Phone, Weiner said.

"I would bet that Nokia will have a tablet, and they would do well in the international market," Weiner said, adding that Barnes & Noble would be a third partner for e-book content for a Nokia-Windows tablet.

Windows 8 could power "lots of devices, including tablets," said Gold, adding that "an e-book reader on such a platform, together with an integrated book marketplace [via Barnes & Noble], can help the sale of such devices, especially convertible notebook-tablet devices."

The Microsoft-Barnes & Noble partnership stems in part from both companies recognizing the success Amazon has had with its Kindle e-readers. "Microsoft wants a piece of that action, so having the content to sell is critical, and the [sales] volumes could be huge," said Gold.

Microsoft is keeping tabs on Apple's deals for e-textbooks and other e-books, Gold noted. "Microsoft can't afford to sit back and ignore Apple, as each e-book on an iPad could easily lead to movement away from back-end computing on a PC or Mac desktop," Gold added. "Microsoft needs to protect its turf."

The Bing search engine could add even more value to the Microsoft-Barnes & Noble e-book partnership, Gold said. "Microsoft has made a huge bet on Bing," he said. "The book market could easily be coupled to Bing for additional services, as Google is trying to do."

And if that's not enough, Microsoft could bundle Skype calling and videoconferencing to add social networking capability to e-book readers. Microsoft acquired Skype for $8.5 billion last October. "That's a potential new market offering," Gold added.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His email address is mhamblen@computerworld.com.

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