Over the past six months, the folks at Staircase 3 have been keeping tabs on the devices that have been downloading their OpenSignalMaps network monitoring app, and so far they’ve recorded downloads onto 681,900 separate Android devices in 195 countries. Now they’ve taken all that data and splayed it out for all to see, and it highlights rather nicely how big a headache fragmentation can be for developers.

For the most part, the results are as you’d expect — runaway hits like Samsung’s Galaxy S II was the most represented device among the 3,997 distinct models they spotted, and Samsung Android devices were far and away the most widely used. What really gets me is how many other devices and brands fill up the rest of that list. Seriously, if you haven’t yet, go look at it. Mouse over some of the smaller blocks, see if there are any brands or devices that ring a bell.

It’s pretty crazy to see just how many players are in the field, and nothing against Staircase 3 — their app is actually pretty damned useful — but it’s not an immediate must-download for every user.

That there are gobs of Android devices floating around out there isn’t exactly a shocker, but data like this really drives home the issue. With so many devices running so many versions of Android with who knows many carrier and manufacturer mandated tweaks onboard, how is a developer supposed to make sure that all of their users gets a consistent experience? They can’t, unless they’re willing to test like crazy.

Google chairman Eric Schmidt famously downplayed the term “fragmentation” at this year’s CES, suggesting instead that people call it “differentiation.” It’s hard not to agree with sentiment on some level — after all, one of Android’s key strengths is how easily it fits into different niches and price points. But according to him, as long as every Android user is able to use the same apps, there’s no problem here.

That strikes me as a rather short-sighted way of looking at it. Downloading and installing apps is one thing, but what I think really counts — the user experience — can still vary from hardware configuration to hardware configuration. Not a day goes by without new Android hardware (or rumors of new Android hardware) make the rounds — hell, just an hour or so ago, the Wall Street Journal reported that Google will soon be filling out the new Devices section in the Google Play Store with new, unlocked “Nexus” hardware thanks to cooperation from up to five hardware manufacturers.

That’s why developers like Animoca have invested what I can only imagine is a sizable amount of money and effort testing their apps with something like 400 Android devices before pushing them out into the world. And of course, fragmentation isn’t just a hardware issue — the OSM post points out that the two most used versions of Android now only account for 75% of the devices they surveyed, down from 90% last year, yet another issue for developers to grapple with.

Does every developer need to go through a process that outlandish? Certainly not — OpenSignalMaps seems to test on a tiny fraction of that, and smaller developers can cover most of their bases with a handful of carefully chosen devices. At the end of the day though, despite the sheer amount of choice and flexibility that Android has provided users, those developers still have a choice to make — do they want to strive for perfection, or do they want to keep their sanity?

Smule has been churning out scores of popular music-making iOS apps for years now, but they’ve been notoriously gun-shy about bringing those apps to other platforms.

As of today though, that streak has finally come to an end — the company has just released their auto-tuning Songify app into the Google Play Store.

Originally developed by Khush (whom Smule acquired toward the end of last year), Songify turns user-recorded speech into surprisingly listenable songs by tuning those voice inputs to go along with preset background music. The iOS version peaked at #1 on Apple’s Top Free Apps chart shortly after its launch in July 2011, and Smule now hopes for similar success as it expands into new territory.

For a while though, it seemed like this day would never come. Late last year, Smule co-founder and CTO Ge Wang told InsideMobileApps that Android app development was under consideration by the company, but issues of audio latency in certain devices meant that not every user would have a consistently solid musical experience. Though company representatives are quick to note that latency is becoming less of an issue over time, Songify sort of side-steps that issue because it doesn’t rely on instantaneous audio feedback like some of Smule’s other apps (say, Ocarina for example).

Still, that didn’t stop the company from testing the waters ahead of today’s official launch. A preview version of Songify was recently published in the Google Play Store to generally positive reviews, though they did point to a few issues that were addressed in the final build.

So what’s next for the team at Smule? In case Songify doesn’t provide you with quite enough musical mirth, Smule has also revealed that their Magic Piano app is set to make its Android debut in just a few weeks, though it too is currently available in preview form for those who just can’t wait.

For now though, Smule is content to hunker down on Android and iOS — company representatives confirmed (again) that expansion into platforms like Windows Phone isn’t in the works at this time.

Big mobile plans afoot for Baidu, the Google of China that leads in search and has launched a host of other services in the wake of that business. The company today unveiled the first smartphone to be built on its own platform, the Changhong H5018. And while that device is designed on a “forked” version of Android — forked Android devices being very popular in China — Baidu says that it doesn’t want to stop there: the idea is to take its platform, the Baidu Cloud Smart Terminal, to other operating systems like Windows Phone and iOS.

“We want Baidu’s Cloud Smart Terminal to function as a platform that sits on top of all operating systems, such as Windows Phone and iOS,” Kaiser Kuo, a spokesperson for Baidu, told TechCrunch today.

“We are not yet working on a Windows Phone device but the hope is to make one,” he noted, adding that while Baidu plans to leave no stone unturned in its strategy, “some stones are proving to be more recalcitrant than others.” That is likely a nod to Apple and how Baidu could develop its platform on iOS without completely ruining its relationship with the iPhone giant.

Mobile is a big and growing area for Baidu. In Q1, it noted that 20 percent of all of its search traffic is now coming from mobile — it is already the leading search engine in official Android devices with 80 percent penetration, Kuo noted — and he added that the mobile traffic percentage is “growing rapidly”, almost certainly faster than its more mature traffic on fixed internet devices. At the same time, mobile continues to boom in China, with the country now outstripping the U.S. and the world’s biggest smartphone market.

The Changhong H5018 is Baidu’s big strategy to create a device that will appeal to the less affluent demographic in the country. While the iPhone has proven to be hugely popular in China, it is sold at a premium price and that cuts out large parts of the addressable market that cannot afford it. Kuo notes that at the moment there are some 1 billion mobile users in the country still on feature devices. “It’s a market dominated by feature phones that prevent users from taking full advantage of the internet,” he said. “There is a tremendous market for low-priced but feature-laden smartphones, and this product fits that niche very well.”

It’s understood that while the basic price for the device will be 1,000 yuan (around $159), it will be sold through resellers that will attach data and calling tariffs to the device — the first named carrier is China Unicom — and subsidize the cost of the handset in the process. The phone will start to sell later this year, the company says.

Part of the reason the device will be priced so inexpensively, Kuo said, is because most of the services that Baidu is loading into the device will be cloud-based. That means the device does not need to have as much processing power built into it. “You don’t need a lot of power, just the ability to connect to the internet because we are shifting the computing from the terminal back to the cloud,” he noted.

Among the services will be a cloud-based storage service, location-based services and Baidu Map, voice recognition and handwriting-based search input, Baidu Music and services to recharge your call and data credits on the device.

In other respects the device sounds like it will be very much on par with other basic smartphones: 3.5-inch touch screen; 3G connectivity; 3 megapixel camera and a 1400mAh battery.

The phone is being made by Foxconn and that in itself is an interesting development and shows how the manufacturing giant — partner to Apple for the iPhone and iPad among many others — also has ambitions to position itself as a mobile brand in its own right.

It also follows on from an earlier model that Baidu had released in conjunction with Dell, which Kuo described as the “precursor” to the phone launched today.

Baidu’s plans to extend its circle of partners for the phones was also indirectly confirmed by its VP of engineering Jing Wang, who noted in a company statement that “The Baidu Cloud Smart terminal platform is a crucial step in Baidu’s overall Cloud strategy in the mobile Internet sphere…it will significantly lower manufacturing costs for many mobile manufacturers and cooperating partners. Baidu is joining hands with hardware vendors, terminal manufacturers, developers and others in the industry so that everyone along the whole value chain is a winner.”

Although Baidu certainly has a lot of ambition, for now it looks like most of the mobile plan is limited to China. Although Baidu has “dipped its toe” into other countries such as Thailand, Vietnam, Japan and Egypt, there are currently no plans to offer Baidu’s new phone in markets outside of the mainland. “The whole point is that it is supported by Baidu’s cloud services and all of these are currently in Chinese and not supported outside of China,” he noted. “When we have robust cloud offerings outside of China, only then would it make sense to offer terminals there.”

Google today announced its latest update for Google Maps for Android with support for Google Offers. One interesting piece of this announcement that stood out was that Google Maps for Android users now get access to free Google Offers like a free coffee or dessert. Turns out, that’s actually just a small part of a wider update to Google Offers. Merchants across the U.S. – including towns where Google’s pre-paid offers haven’t launched yet – can now use a new self-service interface to create these free offers.

We talked to Google Offers’ director of product management Eric Rosenblum about these changes earlier today. According to Rosenblum, there are three major pieces to today’s announcement: a new way for users to use Offers, a new way for merchants to use it, and expanded distribution of offers through Maps for Android.

Until now, Google and most of its competitors in this market have focused on pre-paid offers. With this new free offering, Google wants to give merchants more opportunities to get new customers to their stores. Store owners can use a new self-service interface to set specific times for when and how long an offer should be valid. This new interface also gives merchants access to stock photography and other tools to fine-tune their messages. The coupons can be for money off, a percentage discount or a free product or gift.

This is pretty similar to what Groupon is doing with Groupon Now, the difference being that this is for free coupons and not for pre-paid offers. As Rosenblum put it, this is basically a way to give shoppers “a gentle nudge” to come and try out a new store, coffee shop or restaurant.

For potential customers, this means that they can now use the Google Maps for Android app (no word on whether this feature will come to other platforms anytime soon) to find these new offers and save them. For users who opt in to this, the app will also alert them whenever there’s a nearby offer.

Google just launched an update for Google Maps for Android that brings three interesting new features to the app: integration with Google Offers, support for Google Business Photos and indoor walking directions.

With the new Google Offers integration, Android users will now be able to see which nearby stores currently offer deals. This, says Google, includes both offers that can be purchased, as well as “free” offers that are available immediately. Users can also opt-in to receive notifications when there are offers near them. Google, it is worth noting, also offers a dedicated Google Offers app for Android as well.

The Google Maps for Android app now also lets users in the U.S. and Japan (the two countries where venue owners can already upload their own indoor maps) get indoor walking directions. This is clearly an area Google has been working on for a while. Earlier this year, the company, for example, launched an Android app that allows venue owners to help Google improve its indoor location accuracy.

The app now also features support for Google Business Photos (a.k.a. Indoor Street View). With this feature, users can get access to 360-degree panoramic images from inside local stores and restaurants. These images are now highlighted on every participating business’s Place page in Google Maps for Android.

Way to blow your own horn, Google. Yesterday a newspaper in the UK, the Independent, ran a short item about how Google was about to reach an app milestone — 15 billion apps downloaded. So we reached out to Google to ask about this… and guess what? It already happened.

A Google spokesperson, Gina Weakley Johnson, tells us the milestone was passed “a few weeks ago.”

The last number that Google released with more public declaration was 11 billion downloads, when the store was still called the Android Market, which it announced during its Q4 2011 earnings in January. In April, when Google reported its Q1 2012 earnings, it didn’t mention downloads on Google Play, the newly-rebranded store.

Apple reached 15 billion downloads in July 2011, and the most recent number for Apple is 25 billion downloads in March 2012.

Doing the basic math, that roughly means that Google is seeing about 1 billion downloads of Android apps per month, while Apple is seeing about 1.25 billion app downloads per month.

So there is still a gap in aggregated downloads between the two platforms, despite that fact that Google has nearly caught up with Apple in terms of total number of apps: Currently Google Play has some 500,000 apps, while Apple has 600,000 apps in its app store.

There are other areas of disparity, it seems: Up to the end of January 2012, analyst Horace Dediu notes, Google has paid developers $320 million compared to $4 billion from Apple.

On the other hand, there seems to be other evidence pointing to the fact that Apple’s download rate is slowing down: Fiksu, for example claims that Apple’s app download rate fell by 30 percent in March.

For Google, the drive to have high volumes of app downloads is two-fold: it demonstrates to developers that this is an active and used platform, so that they continue developing for it. And it gives Google a bigger inventory from which it can potentially make more from advertising, which is the company’s real money spinner.

Data revealed in the Oracle v. Google trial over Java patents last week pointed to how Google’s Android effort was money-losing throughout 2010. Documents in the same case also showed that Google projected that it would make a profit on its mobile effort in 2011 and beyond — although we don’t have updated figures from Google that testify to whether that has been the case or not.

But those records also indicated that the vast majority of that revenue will be coming from advertising, with small but growing percentages also coming from app sales. In 2011, Google projected it would make $492.5 million in ads on Android with only $14.5 million in app sales. For 2012, Google projected $804.3 million in ad sales with only $35.9 million from app revenue.

Figures from those documents also showed that Google expected a loss of $113 million in 2010 from Android and that it expected to have profits of $64 million in 2011; $248 million in 2012; and $548 in 2013.

The HTC Titan II has already gone through the Fly or Die ringer, but the real determining factor for these phones is the level of competition surrounding them. In the case of the Titan II, the HTC/Microsoft partnership is most threatened by more HTC and Windows-powered phones, namely the Lumia 900 and the HTC One X.

So what do these phones have that the Titan lacks? How does the Titan wipe up the floor with them?

Well, that’s why I’m here, and why we’ve made this lovely graphic for you.

Truth be told, specs really don’t matter anymore, especially specs like processor clock speed and (I’m sorry to say it) megapixel count on cameras. What really matters is your preferred operating system, display size/resolution, and comfort with design.

When weighing these three phones against each other, the similarities are abundant, as are the subtle differences. For example, the Lumia 900 will net you $100 less than either of the other two phones. At the same time, it’s a touch smaller than the Titan and the One X, and if you prefer HTC hardware to Nokia’s then that doesn’t really matter.

I happen to be a pretty huge fan of the Lumia 900 simply because Windows Phone can pull off its stupid 480�800 resolution requirement on a 4.3-inch screen much better than it can on the Titan’s 4.7-inch display. Past that, the phones are quite similar. The Lumia feels a bit more premium in the hand, yet HTC does an excellent job of making even their plastic phones feel high-end.

If Windows Phone is your flavor, this is definitely a tough call. Good luck.

If it’s HTC that tickles your fancy, it all comes down to the OS. Do you prefer Sense 4 on top of Android 4.0 Ice Cream Sandwich, or would you prefer to play with Microsoft. The One X specs slap down the Titan II like Daniel LaRusso at the beginning of The Karate Kid, but as I mentioned earlier, specs matter less and less these days. Where you’ll really win with the One X is the 4.7-inch 720p display. If you can tote it around comfortably, it really doesn’t get much better than that.

The ball is in your court, my dear readers. Choose wisely.

A post on CNN Money found that during a quick assessment of 10 Verizon stores and reps in New York – arguably a small sample size – the representatives would pitch Verizon’s Android’s 4G phones over the “old fashioned” 3G iPhone. Said one rep: “The iPhone is a great phone, but it’s on 3G. I’m not going to recommend a phone that’s outdated.”

Now I don’t doubt David Goldman’s story that Verizon reps are pushing Android inventory in New York if only to clear out the back room. However, I had to test it myself. I chatted briefly with a Verizon rep online and found that she (I assume it was a she as her name was Chiquita) just wanted to close the sale rather than steer me towards anything else:

Please hold for a Verizon Wireless sales representative to assist you with your order. Thank you for your patience.
You are now chatting with ‘Chiquita’

Chiquita: Hello. Thank you for visiting our chat service. May I help you with your order today?
You: i need a smartphone for my brother. I’m thinking iPhone. Anything I should know?
Chiquita: When ordering a smartphone device would need to add data.
Chiquita: Will that work for you?
kitten: I mean is there anything new that would be better?
kitten: I think he’ll pay for the service. I just want something fast and cool and iPhone seemed like the best one, right?
Chiquita: What is your brother looking for in a device?
kitten: Music, apps, maybe like a good camera. He’s pretty not-geeky
Chiquita: Yes, because I have the Iphoen4S./
kitten: You like it?
kitten: Everyone has it I know but I still have a dumbphone or whatever
Chiquita: With the information you are providing with the Iphone4 would be a great device for your brother. With the fully touchscreen for easy navigation using the web, applications, and music. Our customers really love the Iphone4. With the 8.0 mega pixel camera for taking wonderful photos.
Chiquita: Are you a new or existing customer?
kitten: I think he’s existing but he hasn’t upgraded in a long time.

You’ll also note that Verizon is currently incentivizing 4G with double data plans for LTE phones. We also spoke to one sales rep under the condition of anonymity who said they had heard nothing about any specific promotion to with Android phones. And, as you see in my own exchange, the rep was more than happy to steer me towards an iPhone. Panic averted.

The biggest problems with Kremlinology like this is that some sales incentives may not percolate out to every sales rep and that the impetus to push Android phones may be regional and plays into a number of biases in terms of perceived wealth, gender, and surrounding culture. Although a blind, Turing-style interaction with a sales rep online is fairly blind, whether you’re pushed an iPhone or a RAZR at a store on Broadway has a lot to do with a lot of things. Until we see a document (and we’re looking) that says Verizon reps get extra ponies if they pitch Android over iOS, I’m not buying it.

In September 2010, I wrote a post that ignited an absolute shitstorm around these parts. “Shitstorm” in this case meaning a post with a thousand comments, the majority of which were spewed up by rabid Android fanatics. The title of that post:

Is Android Surging Only Because Apple Is Letting It?

At the time, we were in the midst of a massive Android surge to the top of the smartphone ecosystem food chain. This was happening all around the world, but the focus of this particular post was the U.S. market. Based on some comments made by developer David Beach at the time, I wondered if, as the title suggested, Android was only doing so well in the U.S. because the iPhone was still only available on one carrier, AT&T?

It’s time to revisit that thought because there’s now absolutely no question that this was the case. There’s now data to back it up. What’s more, despite what some surveys suggest, this trend may have fully reversed itself.

Over the past few days, both comScore and NPD have put out data showing that Android still has a healthy hold on the U.S. smartphone market with their best market share numbers yet. According to comScore, Android controls 51 percent of the market. According to NPD, it’s more like 61 percent.

For comparison, Apple is the number two player with 30.7 percent of the market according to comScore, and 29 percent according to NPD.

On the surface, there’s one big glaring problem with these numbers. Actual sales data from the three largest carriers in the U.S. doesn’t seem to back up the comScore and NPD numbers. At all.

In the last quarter, the iPhone accounted for 78 percent of all smartphones sold through AT&T. On Verizon, the iPhone accounted for 51 percent of all smartphones sold. Sprint didn’t report their total smartphone sales numbers, only iPhone sales numbers, but estimates peg the iPhone percentage around 60 percent. The iPhone is not (yet) sold on the nation’s fourth largest carrier, T-Mobile.

That’s 51 percent of all smartphones sold on the nation’s largest carrier (Verizon). 78 percent of all smartphone sold on the nation’s number two carrier (AT&T). And 60 percent of all smartphones sold on the nation’s number three carrier (Sprint). Jay Yarow of Business Insider did the math: all together, the iPhone accounted for 63 percent of the smartphone sales in the past quarter on the big three carriers. The 63 percent number is close to the 59 percent estimated by Raymond James analyst Tavis McCourt last week, as reported by Eric Savitz for Forbes.

And if you believe the Yankee Group, the big three carriers account for roughly 80 percent of the overall U.S. smartphone market. This equates to almost exactly 50 percent of the overall smartphone market in the U.S. for Apple.

It’s hard to see how Android could control 61 percent of the market when there’s only 50 percent to spare after the actual numbers are calculated. Maybe Android is huge with undocumented workers. Undocumented workers who love taking surveys, mind you. But I digress…

And, of course, there are other smartphones out there from RIM, Microsoft, Nokia, and the like. Even giving Android the other 50 percent of the market would mean all of the other players equal zero percent. (Sadly, perhaps not that far off, actually.)

ComScore at least has some wiggle room here. They don’t actually measure phone sales quarter to quarter, but overall market usage. So it’s certainly possible that after a few years of Android sales, they do still control the majority of the U.S. smartphone market. But their numbers get sticky when you look quarter-to-quarter and see that Android’s market share increased nearly four time more than the iPhone’s market share this past quarter. Again, that doesn’t sound right when the iPhone accounted for 63 percent of all smartphones sold on the big three carriers.

When I brought this point up a few days ago, comScore was quick with an answer. They told me that amongst the big three carriers, the iPhone subscriber growth actually did outpace Android subscriber growth, 13 percent to 11 percent. It’s just that overall Android growth from the remaining carriers (meaning T-Mobile and the regional carriers) more than wiped out that difference.

First of all, 13 percent (iPhone) versus 11 percent (Android) growth on the big three carriers still doesn’t sound right if the iPhone accounted for 63 percent of all sales last quarter. Second, if the big three do in fact make up about 80 percent of the overall market, how did the remaining 20 percent tilt the scales 4x in favor of Android (in terms of market share growth quarter to quarter)? It doesn’t make sense.

And then you look at NPD’s numbers. Yarow demolished those earlier. And sure enough, NPD reached out right away with clarifications.

Here’s the real issue: this rapid swing in favor of the iPhone seems to have exposed some serious flaws in the way these market analysts get their data. They’re hiding behind vague technicalities on how their numbers could be what they say, but they still don’t add up. Their problem is that we have actual numbers from the three largest carriers in the U.S., all of which are finally selling the iPhone and boasting about those numbers because they’re huge.

So how do the other guys get their numbers?

Surveys.

In comScore’s case, their MobiLens data comes from “an intelligent online survey of a nationally representative sample of mobile subscribers age 13 and older”. They don’t disclose the number of people surveyed, but you can bet it’s not a massive number. In NPD’s case, they survey 12,811 people.

Which numbers do you trust? Millions upon millions of actual sales reported in a legal manner by public companies or surveys of thousands of people?

Further, as Ethan Kaplan points out, “NPD and the like are incentive based surveys so naturally skew a certain way. Teens, college students, etc.” Several others have made this point over the past few days. The numbers comScore and NPD use in their statistically small surveys are likely skewed for a number of reasons. And again, now we have actual sales data that heavily suggests that’s the case.

By now, I probably have the Android fanatics really upset, so let’s throw out all these rational numbers and instead continue on with the dream that Android is “winning” in the U.S. Not winning in revenue or profit mind you — you know, things that actually matter for business, and things which Android will likely never be winning in any sense of the word — but winning in terms of overall market share. If you want to ignore all the above information and insist that Android is still winning there, that’s fine. But let’s jump back to the beginning of this post.

Again, the argument made in September 2010 was that Android was winning in market share in the U.S. because Apple was letting it win by only making the iPhone available on AT&T’s network. If Android still does control half to two-thirds of the market as the surveys suggest, what does it mean that on the three carriers where the iPhone is available, Apple now controls over 60 percent of these markets on a quarterly basis? (Again, this is fact backed up by actual sales numbers.)

It means that Android was/is winning in market share because Apple was/is allowing it to.

Android was previously the top smartphone OS for both Verizon and Sprint. But that was only because the iPhone was not available on either network until last year. When it became available, it quickly shot to the top. One type of phone outsold hundreds of other models combined. That’s pretty insane.

And it doesn’t speak well for the future of Android’s market share, survey or not. At least not in the U.S. (the rest of the world is more complicated for many other reasons). What if Apple finally puts the iPhone on T-Mobile later this year? Given what we now know — again, from actual data — is there any question that it becomes the top smartphone there? What about the other, smaller regional carriers? That’s already starting to happen.

Android’s only hope is to actually have a phone, or a set of phones, that are more appealing to consumers than the iPhone. But that hasn’t happened in the past four years, so what makes us think that will change this year? Or next year? All Apple has to do is say the word and they can win the market share battle in this country.

Actually, again, if you consider the numbers above, it sure looks like they already have won that battle.

Barnes & Noble has found a new, major partner in its fight to get an edge over Amazon and Apple in the market for e-books and the devices being used to consume them: it is teaming up with Microsoft in what the two are calling a strategic partnership, name yet to be determined.

It will come in the form of a new subsidiary of B&N that will include all of its Nook business as well as its educational College business. Microsoft is making a $300 million investment in the subsidiary, valuing the company at $1.7 billion in exchange for around 17.6 percent equity in the subsidiary.

The news leaves the door open for B&N to eventually spin these off into a separate business altogether — or even sell them to Microsoft. And it leaves a load of questions about what B&N will do next with the Nook, which is currently built on a forked version of Google’s Android platform.

The new company, referred to for the moment as Newco, will contain B&N’s digital business, as well as its College division. While Microsoft will take 17.6 percent, B&N will own 82.4 percent of the venture.

This is a key way of getting more content on to the Microsoft platform — specifically e-books content to ensure that its Windows 8 tablets will be able to compete not only against the best-selling iPad but also the Kindle Fire from Amazon, along with the rest of the company’s e-readers. The Kindle Fire has stolen a march among Android tablet makers and part of the compelling offer is not only the low price ($199) but also the fact that it contains so much content, including seamless access to all of Amazon’s e-book offerings.

This is also a progression — a very big one — of the funding etudes that Microsoft has been making to developers to make sure they are making apps for the Windows Phone platform, a way of getting more content on its platforms, which, it can be argued, may have come too late to the market. The first product to come out of the door? A Nook application for Windows 8, the companies say.

And given that education has been one of Apple’s bigger pushes this year, and the obvious and close links between education and e-reading, it’s not too surprising to see that B&N has also put its College division into this subsidiary. Microsoft, too, has been courting the education market — making its biggest-ever cloud-services deal in the education sector. Nevertheless they have a long road ahead of them. In January, Apple noted that there were already 20,000 educational apps for iOS and that there were already 1.5 million devices deployed in schools, numbers that will inevitably have grown in the last 4-5 months with the launch of the new iPad and numerous initiatives to spread the tablet in the educational sector.

And there is a legal twist to the deal, too: the two companies say they have definitely sorted out their patent litigation now: “Moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoft’s patents for its NOOK eReader and Tablet products,” the two write in the release below. If Microsoft doesn’t use this as an opportunity of possibly persuading B&N to swap over to Windows 8 for a version of the Nook, it will also give it a very interesting inroad into developing more for Android.

As for B&N and the future of these products… this deal looks like it could potentially pave the way for B&N to spin off this business into its own standalone operation, if not into the waiting arms of Microsoft itself — long speculated to be looking at ways of gaining a stronger foothold in the area of mobile devices to better implement its bigger strategy. The idea of a subsidiary was something that B&N had first floated back in January, when it noted that it was weighing up how best to separate its digital business to “maximize shareholder value.”

There are many more questions — such as what this could mean for the company’s broader strategy for growing the market for the Nook (international being a key push that the company has yet to make, apart from some baby steps); and how well, exactly, those products are doing for the company: IDC puts the Nook’s share of the tablet market at just 3.5 percent.

The company is holding a conference call on the deal later today and we’ll update as we learn more.

Full press release below.

New York, NY and Redmond, WA (April 30, 2012) – Barnes & Noble Inc. (NYSE: BKS) and Microsoft (NASDAQ: MSFT) today announced the formation of a strategic partnership in a new Barnes & Noble subsidiary, which will build upon the history of strong innovation in digital reading technologies from both companies. The partnership will accelerate the transition to e-reading, which is revolutionizing the way people consume, create, share and enjoy digital content.

The new subsidiary, referred to in this release as Newco, will bring together the digital and College businesses of Barnes & Noble. Microsoft will make a $300 million investment in Newco at a post-money valuation of $1.7 billion in exchange for an approximately 17.6% equity stake. Barnes & Noble will own approximately 82.4% of the new subsidiary, which will have an ongoing relationship with the company’s retail stores. Barnes & Noble has not yet decided on the name of Newco.

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 in the U.S. and internationally.

The inclusion of Barnes & Noble’s College business is an important component of Newco’s strategic vision. Through the newly formed Newco, Barnes & Noble’s industry leading NOOK Study software will provide students and educators the preeminent technology platform for the distribution and management of digital education materials in the market.

“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.”

“The shift to digital is putting the world’s libraries and newsstands in the palm of every person’s hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content,” said Andy Lees, President at Microsoft. “Our complementary assets will accelerate e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them. We’re at the cusp of a revolution in reading.”

Barnes & Noble and Microsoft have settled their patent litigation, and moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoft’s patents for its NOOK eReader and Tablet products. This paves the way for both companies to collaborate and reach a broader set of customers.

Newco,

On January 5, Barnes & Noble announced that it was exploring the strategic separation of its digital business in order to maximize shareholder value. Barnes & Noble is actively engaged in the formation of Newco, which will include Barnes & Noble’s digital and College businesses. The company intends to explore all alternatives for how a strategic separation of Newco may occur. There can be no assurance that the review will result in a strategic separation or the creation of a stand-alone public company, and there is no set timetable for this review. Barnes & Noble does not intend to comment further regarding the review unless and until a decision is made.

Additional information will be contained in a Current Report on Form 8-K to be filed by Barnes & Noble.

Barnes & Noble and Microsoft will host an investor call and webcast beginning at 8:30 A.M. ET on Monday, April 30, 2012. To join the webcast, please visit: www.barnesandnobleinc.com/webcasts.