Only last week Microsoft had invested $605 million in Barnes & Noble, obtaining a 17.5% stake in their e-books division. This may have been a move by Microsoft to re-enter the e-book business which is a fast growing sector. However, there are chances that this investment may not reap heavy profits for Microsoft.
Microsoft and Barnes & Noble, both companies who once upon a time led their own respective fields, saw technological advancement threaten their position in the market. However, it is interesting to note that while Microsoft could not efficiently deal with the change, while Barnes & Nobel, though less alert, could handle it way better than Microsoft.
Microsoft, who does not face cash issues, has always invested heavily, however issues of internal warfare have caused blunders in their efforts. Prominent examples are of Microsoft working on a tablet for years before Apple ultimately successfully launched iPad or when Microsoft worked on developing an e-reader before Amazon introduced Kindle Fire. As a result, Microsoft is now left trying to catch up with competitors is fields it could have excelled on its own from the very start.
With Yahoo for instance, Microsoft has invested billions to obtain Yahoo’s search engine. Then came Skype, and then Nokia, where Microsoft is trying hard to become the third major player in the mobile ecosystem. Similarly, now they have invested majorly in Nook (B&N’s e-reader), which could be placed in the third position in the tablet market.
Barnes & Noble have constantly innovated, fighting to survive with determination in the world of digital transformation. After introducing Nook in 2009, they managed to cut down Amazon’s market share by soon launching the Nook Color tablet that gave the black and white Kindle tough competition. Currently, Barnes & Noble has a claim of 27% in the e-book market, while Amazon is at 60%.
However, unfortunately, Barnes & Noble lack an apt business model and the cash flow required to maintain their stand in the tablet and e-reader market all by themselves. This explains their move to collaborate with Microsoft to create a subsidiary valued at $1.7 billion.While the sale of e-books have always been expected to rise up to the levels of the sale of paper books, Microsoft, while trying to gain foothold in this business has been out-innovated by Barnes & Noble, and how!
