When Microsoft invested $300 million in Barnes & Noble Inc’s Nook Media LLC e-book division in 2012 it looked at the time to be a solid investment following a few years of progress from Nook as it raced to compete with Amazon.com Inc’s Kindle and Apple Inc’s iPad. In spite of Nook’s efforts, that included giving away gifts and other non-book related freebies with its e-books, Nook’s progress has been on the wane since Microsoft’s buy-in two years ago.

In June this year Barnes & Noble made it public that it was planning to change the focus of its Nook subsidiary, launched in 2009, and develop its retail hardcopy book business – although in a recent report the company said it was unsure what the future holds for Nook Media. Barnes & Noble reported a first quarter loss of $37.6 million. In the second quarter the company’s earnings were $12.3 million, down from $13.2 million the previous year. Though shares in Barnes & Noble have risen 41 percent in 2014, investors’ doubts over the termination were reflected in a 5.4 percent drop in New York yesterday.

Microsoft, whose share of Nook stood at 17 percent, said in an email about the split, “As the respective business strategies of each company evolved, we mutually agreed that it made sense to terminate the agreement.”

The termination will come at a loss for Microsoft on the investment, but bleeding payments reported at something near $21 million per quarter to Nook will be cauterized. Barnes & Noble will pay Microsoft $62.4 million as a cash payment and $2.7 million in shares to buy back the stake owned by the Redmond company. A contingency payment will also come to Microsoft, while the divorce will be completed in March 2015, said a spokesperson from Barnes & Noble on Thursday.

Analysts have said that the slip could become a positive step for Barnes & Noble, who has suffered somewhat from a personality disorder for some years: are we a tech company, or are we a retail bookstore? Microsoft’s buy-out might just help to define in which direction the company should proceed, and possibly attract other investors once the path is clear.

Photo credit:  Wesley Fryer via photopin cc