Kindle's Big Flaw

Fool analyst Rex Moore says Amazon.com's (Nasdaq: AMZN  ) new Kindle 3 is great in almost every way. It's easier to read than its predecessors and lighter; it has greater battery life and a tempting $139 price tag for the Wi-Fi-only unit. The one big flaw is it can't check out e-books from the library like almost every one of its competitors can (with the notable exception of Apple's (Nasdaq: AAPL  ) iPad).

The Barnes & Noble (NYSE: BKS  ) Nook, Sony's (NYSE: SNE  ) e-reader, and others can download and display e-books in the Adobe ePUB and PDF formats used by most libraries.

Not many people know you can check out library books from the comfort of your home and download them to your e-reader. They expire after a set amount of time and can't be read unless they're checked out again. (Check with your local library to see if it offers e-books, and how large its collection is.) This is quite an amazing feature; if more folks knew about this, it might really accelerate e-reader sales.

Rex doesn't expect Amazon to support the ePUB format anytime soon, for competitive reasons. Management wants to keep a proprietary, closed format to keep Kindle owners buying e-books from the Kindle store. This greatly increases switching costs, because when it's time to buy a new device, a user with dozens of e-books won't switch to a device that can't display them.

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