Microsoft counts on allies in mistimed tablet market

The US software colossus turned a draining patent lawsuit with Barnes & Noble into a mutually beneficial alliance that could make Nook digital books a cornerstone of a content "ecosystem" vital to selling Windows 8 tablets.

Microsoft said Monday that it will make a $300 million investment in a new Barnes & Noble subsidiary focusing on the bookseller's digital reading capabilities, including its Nook tablet, and its college businesses.

"It is not a surprise they are making this kind of investment," said Gartner Research analyst Michael Gartenberg.

"Barnes & Noble is probably the best partner for them, and it insures Windows has a book and magazine service as part of its overall ecosystem."

Tablets powered by Windows 8 software are expected by the end of this year.

Amazon.com Kindles based on free Google-backed Android operating systems and Apple iPads have proven that while buyers like slick hardware, they love devouring videos, music, applications, digital books and other "content."

"Sometimes we focus too much on the technology," said Michael Cherry, an analyst at Directions On Microsoft, an independent firm that tracks the Redmond, Washington-based technology firm.

"The success of tablets isn't going to be because it is running Windows, but because it has the apps people want and a price people want to pay for that kind of device," he continued.

Cherry is certain Microsoft will make more alliances to cultivate a rich ecosystem for Windows tablets.

"This is just the beginning; there will be more deals," the analyst said. "When you are late to the party you often have to encourage partners to work on the platform."

Ironically, Microsoft launched tablet software a decade ago only to see it fail because publishers and readers weren't ready for it, according to analysts.

"Sometimes Microsoft is too early to the party," Cherry said. "Timing is everything."

Windows-based tablets boasting features such as removable keyboards for typing and styluses for touch-screen commands were released in 2002 but didn't catch on.

"Once again Microsoft led but let someone else take it away from them," Gartenberg said. "Microsoft is often early to the party, has the vision but not the wherewithal to stick with it."

Microsoft typically avoids making its own hardware, preferring to provide software to gadget makers. Microsoft device flops include Zune players launched to challenge on iPods and Kin smartphones geared for the young.

In contrast, Xbox videogame consoles Microsoft fielded to take on Sony PlayStation systems have become a big winner.

"Microsoft has a tendency to get the product right but to be stingy so you have the Windows phone failure, Zune failure, Kin failure...," said independent analyst Rob Enderle of Silicon Valley.

"They invested heavily in Xbox, and it succeeded."

The timing of Microsoft's return to the tablet party is a non-issue since rivals have been unable to overthrow iPad, according to NPD analyst Stephen Baker.

"This is about Microsoft building up an ecosystem more than anything else," Baker said. "This is more Microsoft trying to bring some allies into the battle."

The digital textbook market was deemed by analysts a shrewd place to start because it has yet to be claimed and premium prices charged by Apple for its slick iPads can be daunting to schools and students.

Meanwhile, textbooks are among the strengths of Barnes & Noble and Microsoft computers have "deep hooks" in education, Enderle said.

"Where neither one separately is well positioned, together they would be better positioned than Apple is," Enderle said. "This gets Nook, Microsoft and Barnes & Noble back in the game."

The alliance also means that Microsoft should be able to create a digital books and magazine library that spans the array of gadgets or computers powered by Windows software.

"Apple and Amazon will both see this as a potential threat and more against that threat," Enderle said.

"The clock is ticking. Even though Microsoft has advantages, it doesn't have a lot of time to deliver something to market."