UPDATE 1-Barnes & Noble has software for college market

* Allows instant downloads, searchable note-taking

* Shares down 1 pct

NEW YORK, July 12 (Reuters) - Barnes & Noble Inc (BKS.N) said on Monday it is launching software designed to help college students manage electronic textbooks and other class materials on their computers in a bid to win a larger share of a college textbook market moving further online.

The software, NOOKstudy, is free and allows instant downloads of e-textbooks and academic and trade titles on computers. It has features such as letting students highlight and take notes that are searchable.

Barnes & Noble's college bookstore business operates about 637 stores and makes up about one-sixth of the bookseller's sales.

Sales at its college stores open at least a year rose 2.9 percent during the quarter ended May 1, but the No. 1 U.S. bookstore chain expects sales at those stores to be flat this year.

At an investor day last month, Barnes & Noble executives said its ability to operate an electronic bookstore would help it win more contracts with colleges.

"As textbook sales move progressively more towards online and digital, it will accelerate the college-operated bookstores to seek a partner like Barnes & Noble to run their store," said Mitch Klipper, chief executive of the company's retail group.

Barnes & Noble shares were off 14 cents, or 1.1 percent, to $13.14 in early trading on the New York Stock Exchange. (Reporting by Phil Wahba, editing by Gerald E. McCormick)