Microsoft has invested $300 million in eReader firm Barnes and Noble, ushering the beginning of a new ‘strategic partnership’. The partnership consists of a 17.6 percent equity stake for Microsoft and will 'accelerate the transition to e-reading'.

The investment will be primarily used to set up a new subsidiary currently known as Newco, aiming to bring together the digital and College businesses of Barnes & Noble. According to Microsoft, one of the first benefits for customers will be a NOOK application for Windows 8, which will extend the reach of Barnes & Noble’s digital bookstore by providing one of the world’s largest digital catalogues of e-Books, magazines and newspapers to hundreds of millions of Windows customers.

“The formation of Newco and our relationship with Microsoft are important parts of our strategy to capitalize on the rapid growth of the NOOK business, and to solidify our position as a leader in the exploding market for digital content in the consumer and education segments,” said William Lynch, CEO of Barnes & Noble. “Microsoft’s investment in Newco, and our exciting collaboration to bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, will allow us to significantly expand the business.”