Pearson PLC (NYSE:PSO) has acquired 5% stake in Barnes & Noble, Inc. (NYSE:BKS)'s Nook business, just less than three months after the New York-based content provider sealed a partnership deal with technology giant, Microsoft Corporation (NASDAQ:MSFT). The New York-based content, commerce, and technology company provides access to books, magazines, newspapers, and other content through its multi-channel distribution platform.
Barnes & Noble is trying to wrestle a share of the e-Book market from eCommerce giant Amazon.com, Inc. (NASDAQ:AMZN) and its partnership with Microsoft along with Pearson's stake could play a vital role in the process.
The British publisher and education company announced on Friday that it was investing $89.5 million in Barnes & Noble's Nook unit, which triggered a rally in Barnes & Noble stock, despite the company having announced that it was expecting a miss in its year end projected sales. The holiday sales disappointed exponentially compared to expectations, which had predicted a growth rate of between 3-4 percent. The Holiday season sales grew by a paltry 0.7 percent, way below last years growth rate of two percent.
Nonetheless, it seems as though the industry remains ever attractive judging by Pearson's investment Nook Media. Pearson still has the opportunity to acquire an additional 5 percent, while Barnes & Noble's stake is now down to 78.2 percent. Pearson is also the publisher of the Financial Times Newspaper. On the other hand, Microsoft's $300 million investment earns it some 16.8 percent stake in the Nook business.
With Microsoft, it remains to be seen whether or not, its Surface RT tablets are part of the large picture moving forward. The Nook tablet uses Google Inc (NASDAQ:GOOG)'s Android O.S, which holds the largest market share in smart devices. Microsoft's investment in Nook Media will no doubt bring into play the Windows RT O.S. Meanwhile, Barnes & Noble also admitted that its Nook business unit is unlikely to meet the projections, which estimated that it would cut down on losses compared to last year.
Barnes & Noble, Inc. (NYSE:BKS) faces a stiff challenge of posing a threat to Amazon's Kindle tablets dominance of the e-Book market. The company must conjure a near magical move in order to manage a significant claim on market share.
In a statement, Pearson North America Chief Executive, Will Ethridge, was quoted saying, “Pearson and Barnes & Noble have been valued partners for decades, and in recent years both have invested heavily and imaginatively to provide engaging and effective digital reading and learning experiences. This new agreement extends our partnership and deepens our commitment to provide better, easier experiences for our customers,” reported the New York Times Dealbook.
Following the announcement, shares of Barnes & Noble, Inc. (NYSE:BKS) surged nearly 10 percent during the early morning hours before settling at 6.62 percent at about 11.11 a.m. On the contrary, Pearson PLC (NYSE:PSO) shares dipped slightly by about 0.26 percent.