Microsoft and Barnes & Noble terminate their Nook Media deal

Microsoft and Barnes & Nobles officially are parting ways, with B&N terminating its Nook Media deal with the Redmond company.

B&N announced the cancellation of the agreement on December 4, two years after Microsoft initially invested $300 million to create a separate Nook Media company together with B&N. Microsoft's deal with B&N was part of a patent dispute settlement between the two companies, putting to rest B&N's refusal to pay Microsoft patent royalties for its Android-based readers.

In March 2014, Microsoft and B&N announced they were redoing their agreement. Under the terms announced then, Nook Media was allowed to discontinue distributing the Nook Windows app and to cease work on its Windows Phone app. At that point, there seemingly was a replacement app coming for the Nook Windows app coming, which was confusingly named "Microsoft Consumer Reader."

But no new Windows or Windows Phone e-reading application ever materialized. My sources said recently that Microsoft is most likely going to bow out of the e-reading space (at least for now). No Windows-based Nook e-reader or tablet ever materialized, either. Instead, Samsung ended up building an Android-based Samsung Galaxy Tab Nook line.

"As the respective business strategies of each company evolved, we mutually agreed that it made sense to terminate the agreement," a Microsoft spokesperson said.

B&N announced yesterday that its Nook digital content, devices and accessories had revenues of $64 million for its second FY 2015 quarter, which was down 41.3 percent from the year-ago quarter.

In an 8-K filing, B&N detailed the terms of the "restructuring of the NOOK Media agreements" designed to provide a path for the "potential separation of our Retail and NOOK Media businesses." Under that new restructuring, the Microsoft deal is cancelled, and B&N has agreed to buy out Microsoft's investment in Nook Media via a combination of cash and stock.