Microsoft Deal Raises Stakes In E-Book War

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Microsoft (NasdaqGS: MSFT - news) has secured a deal with US book giant Barnes & Noble (Dusseldorf: BAR.DU - news) in an attempt to take on rivals Amazon and Apple (NasdaqGS: AAPL - news) in the electronic books market.

The two companies are teaming up to create a subsidiary for Barnes & Noble's e-book and college textbook businesses, including its Nook tablet, with Microsoft paying $300m (£185m) for a minority stake.

The venture, which is yet to be named, should enable the world's biggest software group to grab a bigger share of the rapidly growing market for electronic books, currently dominated by Amazon's popular Kindle tablet and ebook reader, as well as the Apple iPad.

The Nook, which is the Barnes & Noble competitor in the segment, will get an application for Microsoft's new Windows 8 operating system.

While it is not yet available in the UK, the bookselling firm has said it wants to bring the device to customers outside of the US.

In a joint statement, the companies said the deal "will extend the reach of Barnes & Noble's digital bookstore by providing one of the world's largest digital catalogues of e-books, magazines and newspapers to hundreds of millions of Windows customers in the US and internationally".

Microsoft president Andy Lees added: "The shift to digital is putting the world's libraries and newsstands in the palm of every person's hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content."

In February, Barnes & Noble unveiled a new version of its Nook tablet, with the same $199 (£123) price tag as Amazon's Kindle Fire.

The Kindle Fire, yet to be released in the UK, caused Amazon shares to surge last week when it announced massive sales of the new product in its latest trading update.

Microsoft, founded by billionaire philanthropist Bill Gates, defied market expectations earlier in the month when it posted strong quarterly sales of its Windows 7 operating system despite the imminent release of tablet-friendly Windows 8.

The software giant's Windows 8 Preview software is due to be released in June.