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Barnes & Noble, Microsoft end Nook partnership

Barnes & Noble Inc struck a deal to buy Microsoft Corp’s stake in Nook Media LLC, ending a two-year partnership. The two companies parted ways, with Barnes & Noble  buying out Microsoft for about $120 million. In just over two years, the Nook business has lost more than half its value. Microsoft invested $300 million in Barnes & Noble’s Nook e-reader in 2012 to gain a foothold in the fast-growing e-books market. As of September 9, Microsoft owned about 17% of Nook Media through preferred shares.

Barnes & Noble shares closed down 5.4% on the New York Stock Exchange after the company also reported a much-weaker-than-expected quarterly profit, due to lower sales of Nook devices.

Revenue for the Nook segment in the most recent quarter fell 41 percent, to $64 million, compared with the period last year. Sales of e-books and other digital content fell 21 percent, to $45 million. Barnes & Noble said in June it would spin off its Nook Media business, which includes college bookstores, to focus on its retail book business.

Store closings in recent years have left Barnes & Noble  with a base of 658 retail stores. A shrinking store footprint probably drove down sales at the company’s retail unit, which fell 3.6 percent in the quarter. The company’s strongest performing segment — its college bookstores — showed only a modest gain in revenue, increasing nearly 2 percent. In the face of declining annual revenue, Barnes & Noble has been experimenting with new strategies (teaming with Google Shopping Express & Samsung, for instance).

“We mutually agreed that it made sense to terminate the agreement,” a Microsoft spokesman said in an email. Microsoft will lose money on its initial investment, but will also be spared any future payments to fund Nook, which were running at about $21 million per quarter.

Barnes & Noble said it now expected to complete the separation of its Nook Media business at the end of August 2015.

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