It also gives Microsoft a direct interest in electronic publishing just as the market for downloadable college textbooks starts to take off and the publishing industry undergoes a radical shift toward electronic distribution."It's a good strategic deal," said Sid Parakh, an analyst at fund firm McAdams Wright Ragen. "It gets Microsoft in the game for e-readers, and gives them access to a market that has been growing nicely and they've basically sat out of. It also makes Windows 8 a more compelling platform from an e-readers perspective."
Shares of Barnes & Noble soared 60 percent, while Microsoft shares, which recently hit a four-year high, were flat. Microsoft's initial investment values the new unit at $1.7 billion. Over the next five years, Microsoft has committed to invest another $305 million.The deal - initially worth only 0.5 percent of Microsoft's cash hoard - is financially small, but strategically important for both companies.