Will Amazon Counter the Microsoft/Barnes & Noble Deal?

Amazon is facing a new threat now that its chief competitor has teamed up with Microsoft. What does this mean for the Kindle maker, and how will it respond? "I don't think Amazon has to do anything," Herman Leung, an analyst with Susquehanna International Group, told Benzinga. "They have been heads down and focused on their own Kindle strategy. I think where they are focused is just growing the Kindle ecosystem." Amazon AMZN might be safe, but make no mistake: this is a big deal for Microsoft MSFT. "I think for Microsoft to succeed in the tablet space, they need some content and some e-reader capabilities and some digital content angle, which has been largely absent from their strategy," said Leung. "I think the Nook and the content library that's on the Nook is one way to combat that and offer an angle of [its] own." That said, Leung believes that without the "scale of an Apple AAPL and without the content of an Amazon, I think this was the only viable option that was attractive to Microsoft from that standpoint, because I don't think Apple or Amazon would do anything from that angle." "It kind of shows how valuable [the] tablet and digital content [market] will become over time," he said. Friends With Benefits Who benefits most in the Microsoft/Barnes & Noble alliance? "I think they both need each other to succeed," said Leung. "I think they're both lagging. They both have, I would say, products that are not the market leaders in their respective segments, so they need each. It's more of a survival thing than winning at this point." Leung said that with Barnes & Noble, "you have a large technology partner that will invest in your business longer term that kind of gives you more runway." "At the same time, for Microsoft, you have a toe into the digital content space….that can potentially be running on Windows over time," said Leung. Follow me @LouisBedigianBZ