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Microsoft Shows Interest in Buying Nook’s E-Reader Business (BKS, MSFT)

Shares of Barnes & Noble (NYSE: BKS) soared on Thursday after TechCrunch reported that Microsoft Corp. (NASDAQ: MSFT) has considered offering the bookseller $1 billion to acquire its e-reader (tablet) business.

Shares were gaining about 21% in early trade as investors are expecting a possible deal for the Nook Media’s digital arm.

Currently, Microsoft holds approximately 17.6% stake in the Nook division, which it acquired by paying $300 million in 2012.

TechCrunch quoted sources familiar with the mater as saying that Microsoft would now eye taking over the bookseller’s e-books and devices businesses.

If the deal materializes then the Nook business will focus only selling apps on “third party” devices such as IPads.

According to TechCruch, a person familiar with the matter confirmed that paperwork pertaining to the deal was genuine but added that these (documents) were drafted few weeks ago. As a result, it is unclear whether Microsoft still wants to approach Barnes & Noble for the deal. According to TechCruch, the person familiar with the mater cautioned that it could take several weeks to finalize the deal.

Microsoft’s interest in buying the e-reader business of Nook comes just two months after when Barnes and Noble’s Chairman Leonard S. Riggio said that he was keen to buy bookseller’s 689 stores.

In case the deal is completed then it will be mutually beneficial for Barnes and Noble and Microsoft as both companies are going through several challenges. For Barnes & Noble selling Nook division will bring much needed capital even as Microsoft will look to enhance e-reader business at time when its  demand for some other products like windows operating system is easing due to falling demand for PCs.

While representative from Microsoft was not immediately available to throw some light on the possible deal, spokeswoman for Barnes & Noble declined to comment.

Earlier in December 5, Pearson, a British educational publisher which also owns the Financial Times, acquired  5% stake in Nook Media.

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