Microsoft (MSFT) Buys Nook, Barnes & Noble (BKS) Hits New High

Barnes & Noble’s (NYSE: BKS) stock is soaring to new heights this morning after Microsoft (Nasdaq: MSFT) agreed to invest $300 million in its Nook Tablet business.

The Nook is Barnes & Noble’s attempt at breaking into the burgeoning electronic tablet business currently dominated by Apple’s (Nasdaq: AAPL) iPad and Amazon’s (Nasdaq: AMZN) Kindle Fire.  The device debuted in November, and includes many of the same features those other tablets have: a touch screen that allows users to watch movies, listen to music, read books and check their email, among other functions.

Now Microsoft is buying a 17.6% stake in the device, boosting Barnes & Noble’s stock to a 52-week high. Barnes & Noble shares are soaring in early trading today, up 68% to $22.90 a share as of 10:35 a.m. eastern. At one point today, the stock reached as high as $26 a share. Prior to today, its previous high was $18.73 a share.

Thanks to Microsoft’s generous investment, Barnes & Noble’s market cap has ballooned from $791 million all the way to $1.3 billion in a matter of hours.

In exchange for its investment, Microsoft will receive a Nook application for its new Windows 8 program, which is scheduled for release sometime this summer. That should give the Nook some much-needed publicity. In addition to trailing the iPad and Kindle Fire in e-tablet sales, Nook’s book-buying app is currently only available in the iPad and Android devices.

Barnes & Noble reported a loss of $93.7 million in its digital business last quarter, up from $50.5 million a year earlier. But the company pinned the increased losses primarily on ramped-up advertising costs. Sales of its devices actually improved last quarter.

As a whole, Barnes & Noble reported earnings of $52 million last quarter – the company’s first profitable quarter in at least a year.

Microsoft’s stock is virtually unchanged on news of its Nook deal.

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