Microsoft Nook Deal: Winners & Losers (Update 1)

NEW YORK (TheStreet) -- Barnes & Noble(BKS) has pulled itself from the brink of destruction, and teamed up with Microsoft(MSFT) to provide a formidable third entry in the tablet market.

The partnership sees Microsoft and Barnes & Noble teaming up to form a joint venture for the NOOK tablet, bringing together Barnes & Noble's digital and college businesses.

The tablet market has been dominated by Apple's(AAPL) iPad, but the joint venture makes Barnes & Noble a formidable player in the space. This could also impact other tablet players who aren't used to going up against the marketing muscle of Microsoft and Barnes & Noble.

Here are the winners and losers from today's announcement:

Barnes & Noble: Winner

Barnes & Noble is the obvious winner here, with shares soaring some 90% on the back of this news. The partnership values the retailer at $1.7 billion, and still allows Barnes & Noble to own 82.4% of the new company, tentatively titled 'Newco' in the companies' statement.

The deal also allows Barnes & Noble to spin off its NOOK business, which it had previously talked about doing, and get a $300 million cash infusion from a strategic partner that has far greater marketing and advertising muscle.

"The two companies agreed on a valuation for "Newco" that was a shade over 2x the market cap of Barnes & Noble before the deal, telling me little is expected from the Barnes & Noble retail assets in the future, which is kind of intriguing as it could be viewed as undervaluing the entire company," wrote Real Money contributor Brian Sozzi.