Microsoft is investing $300-mln into Barnes & Noble Inc.’s digital book platform, Nook.

The joint venture, which does not have a name yet, triggered a staggering 80 per cent increase in the American book retailer’s pre market trading. The transaction is valued at $1.7-bln, compared to B&N’s entire market capitalization, which is at $800-mln.

Microsoft will own roughly 17.6 per cent of the new subsidiary, with B&N retaining the rest. The new subsidiary will include B&N’s college book unit, and maintain educational focus.

The news comes a year after Microsoft sued B&N for patent infringement, which was settled as a part of this new alliance.

So far, the strategic partnership seems to be a win-win for both parties. For Microsoft, it is an entry into the long-coveted e-reader business, and for B&N, the new spin off secures a much needed revenue stream for the ailing publishing empire. It also hints at a possible entry into a global market, which has been dominated by competitors Amazon.com Inc. and Apple Inc.

B&N has expressed its wish to grow out its Nook business as early as this January, though at the time, the business did not seem profitable enough.

A Nook application will be included in Microsoft’s latest Windows 8 OS, launching early June.

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May Jeong is Toronto Standard’s business editor. Follow her on Twitter @mayjeong.

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