Microsoft Said to Pursue $1 Billion Deal for B&N's Nook

Tickers in this article: AOL BKS GOOG MSFT

NEW YORK (TheStreet) - We knew something was going on with Barnes & Noble's Nook tablets.

Earlier this week, Nook devices failed to make a showing in the latest list of tablet sales leaders and that Nook tablets were being heavily discounted during the week leading up to Mother's Day. Now, we may be learning a lot more about what's going on behind the scenes.

According to an internal document that was reportedly obtained by AOL's TechCrunch, Microsoft wants to buy B&N's Nook e-book division outright and may be willing to pay $1 billion for it.

In mid-afternoon trading, Barnes & Noble was gaining 23% to $21.85 while Microsoft was falling 0.6% to $32.78.

Last year, Barnes & Noble spun-off their tablet division into a new joint venture called Nook Media LLC with a $300 million investment from Microsoft. That new company was handling Nook tablets as well as B&N's college bookstore business.

If the secret document is correct, Microsoft's plan is to sell-off the college retail chain and keep Nook's digital division - but not Nook tablets. According to the report, Barnes & Noble will dump all of their Nook Android tablets by the end of next year.

The report says that while their tablets will be discontinued after the 2014 fiscal year, Nook content will continue on through "third-party applications. B&N and Microsoft are already working toward that trend under the existing joint venture.

More than 10 million Nook devices (e-readers and tablets) have bee sold so far as well as 7 million active content subscribers. In fiscal year 2012, Barnes & Noble reported that their Nook business was responsible for nearly $1.22 billion in revenues which translated into a loss of $262 million (EBITDA). They've estimated that revenues will fall in fiscal 2013 as well.

For Microsoft the sale should mean an almost instant infusion of content for their struggling Windows 8 platform and their line of Surface tablets as well as one less Google Android-based tablet line to worry about.

We've reached out for corporate comment on the report. Barnes & Noble spokesperson Mary Ellen Keating said "The Company has no comment on the Tech Crunch report" and had nothing further to add. The response from Microsoft PR firm's Rapid Response team spokeswoman simply said "Unfortunately, Microsoft does not comment on rumors or speculation".