Microsoft, surrounded, wants Nook for the content

(MoneyWatch) Microsoft (MSFT) is considering a $1 billion purchase of the Nook Media joint venture with Barnes & Noble (BKS), according to a TechCrunch report.

Why would Microsoft want more hardware devices? It doesn't. But Microsoft is nearing its wit's end. Management has made mistake after mistake in a post-PC world, where hardware is never enough to keep customers, and increasingly more competitors -- like Amazon (AMZN) -- turn up to take as much market share as they can. Microsoft is quickly trying to catch up, but given how difficult it was for the company when it had years' more time, whether it can do what is necessary before missing its chance for an initiative is a big question.

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Microsoft doesn't need Nook Media for its hardware design. Although the company probably could put the equipment to use, it would be awkward, to put it mildly, if it decided to help fuel its future with a set of tablets and e-readers running Google (GOOG) Android. If anything, Microsoft would have to undertake an immediate retooling of the products to work with Windows 8 RT, the version of its operating system designed to run on low-power chips designed for mobile devices.

Nook's only attraction for Microsoft is that it has an existing e-book and electronic magazine ecosystem. Publishers and authors can deliver works that readers then buy. It is an example of how Microsoft has failed to read the direction of the market and either build or buy what it needed in a timely fashion. It has been clear for years now that software, music, videos and publications are what consumers want. A major factor that set personal computer sales racing ahead in the 1980s and early 1990s was a sudden increase in availability of applications that could run on the devices.

But as Google and Apple (AAPL) and Amazon -- which is rumored to be developing its own smartphones to join the Kindle line of tablets -- have readied the supporting merchandise and services infrastructures necessary to sell mobile devices, Microsoft has drifted behind.

That is a twisted accomplishment, given how much it has put into content for the Xbox, which is one of the more popular home devices for streaming video. But at what point is such work supposed to come together with mobile? Microsoft has put itself into the position of an underdog. Perhaps company management will get a charge out of feeling behind, but give other players too much of a head start, and you may set yourself up for a loss.