The Nook Is In No Man's Land

Remember about 10 years ago, when everyone was talking about the "paperless office"? The idea was that offices wouldn't need to use paper, now that all companies were using the Internet and email. Finally, we would be able to stop killing so many trees and wasting natural resources.

How's that working out?

Today, the refrain is somewhat different, but I expect a similar result. The proliferation of e-readers and their more accomplished big brother, the tablet, will supposedly make physical books disappear. Some have written that physical newspapers and magazines will vanish within the decade.

The e-reader business has generated a lot of positive buzz for a struggling publishing industry, and it's even helped a company near its deathbed show some signs of life. However, I don't believe the physical book is going away. And for Barnes & Noble's (NYSE: BKS  ) Nook and every other e-reader not made by Amazon.com (Nasdaq: AMZN  ) , all I see is a dead end.

Welcome to Apple's world
To be fair, Barnes & Noble's new NOOKcolor e-reader has been well-received and highly regarded. But there's a big gap between an e-reader like Amazon's Kindle and a tablet like Apple's (Nasdaq: AAPL  ) iPad. Products that fall in between enter some very unfavorable territory.

Barnes & Noble's new NOOKcolor has stumbled into that no-man's-land, between the pure e-ink experience of the Kindle and the multimedia power of the iPad. Sure, at $249, the NOOKcolor costs about half as much as the entry-level iPad. But consumers looking only for an e-reader can buy a Kindle for $139.

The NOOKcolor combines the worst attributes of these competitors' products. It's not as easy to read as the Kindle or other e-ink readers, and it doesn't come close to the functionality, or even the battery life, of an iPad. Do you think any Barnes & Noble product will be able to compete at that next level with Apple? I sure don't.

Steve Jobs doesn't, either. During Apple's most recent conference call, he called the imminent arrival of middle-of-nowhere seven-inch screen tablets "dead on arrival." The Apple CEO was most likely talking about upcoming tablet releases by closer rivals such as Research In Motion (Nasdaq: RIMM  ) and Hewlett-Packard (NYSE: HPQ  ) , and the substantial number of tablets that will use Google's (Nasdaq: GOOG  ) Android based operating system. However, the seven-inch NOOKcolor fits nicely into this category as well.

More disturbing is the increasing competition and industry fragmentation on the horizon. It's expected that at least 50 new tablet devices will debut at the Consumer Electronics Show in 2011, as well as new products from other manufacturers of dedicated e-readers, such as Sony (NYSE: SNE  ) . The long-awaited launch of Google's new online book retailing site, Google Editions, should only increase this market fragmentation. The new site will let consumers download books directly from Google's site on just about any device. This universal format should be a positive, since it offers consumers more purchasing options, rather than being locked into a dedicated e-reader or tablet.

Long road to nowhere
I could get more excited about the NOOKcolor if the Barnes & Noble business model were still viable. But the company is not an e-reader or tablet maker: It's a brick-and-mortar retailer on its last legs. Just as the "paperless office" never materialized, I don't believe the bookless world will, either. But that doesn't mean there will still be a need for large brick-and-mortar retailers like Barnes & Noble and Borders (NYSE: BGP  ) .

Of course, Amazon isn't naturally a device maker, either -- but it is an innovative and rapidly growing business that will most certainly play an extremely important role in the growth of e-commerce and technology delivery over the next decade. Unfortunately, I can't say the same for Barnes & Noble.

Andrew Bond owns no shares in the companies listed. Amazon.com and Apple are Motley Fool Stock Advisor picks. Google is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers pick. The Fool owns shares of Apple and Google. You can follow Andrew on Twitter @Bond0 or on his RSS feed. Try any of our Foolish newsletter services free for 30 days. The Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 03, 2010, at 5:29 PM, pjw1954 wrote:

    I am a Nook owner. I can't understand why more people are not purchasing it. I have downloaded 17 library books since I purchased Nook in July--FOR FREE! Yup, the books are free! You can't do that with Kindle or iPad!!

  • Report this Comment On December 03, 2010, at 6:04 PM, foolindeed1 wrote:

    Yet another article from Fool's so-called "analysts" that have been holding a large number of Amazon and Apple shares for years. Yet again, all they could say is "road to nowhere" for Nook Color which has been receiving rave reviewes and called "game changer" and "head of the class" everywhere else but at Fool's. Ignoring these "analysts" would be the best action for any resonable reader.

  • Report this Comment On December 03, 2010, at 6:33 PM, JYK98 wrote:

    I, too, am a Nook owner, and I love it. Granted that Apple and Amazon are getting the lion share of the media spotlight, but I hope Nook will have a chance at carving out a sizable chunk of the market, because it's not proprietary. With Nook, I can read Secure PDF or EPUB formats, so I didn't have to repurchase some of the ebooks, which I might have been forced to do with Kindle or iPad.

  • Report this Comment On December 03, 2010, at 9:47 PM, kthup wrote:

    The author doesn't believe the physical book is going away. He says the bookless world will never materialize. But he believes there will be no need for bookstores. That's good logic there. Barnes & Noble is not an e-reader or a tablet maker, he says. Yet they have made both, under their own brand, which is something no other book retailer has done. BAMM is selling NOOK in their stores, and they are BKS competition. Walmart and Best Buy are selling NOOK. Does the author even understand what BN's business model is? He cites Google's offering options so that consumers aren't locked into a particular device, so obviously he does not. He says "to be fair" and says something nice about a company that is not Amazon or Apple. Wow, what an open mind he has. What garbage. Fools indeed.

  • Report this Comment On December 03, 2010, at 10:44 PM, TMFBond007 wrote:

    Thanks for the commments all.

    I am glad you are enjoying your Nooks. I never said the Nook wasn't a good product, and all of the feedback I have heard has been pretty positive so far, as I mentioned.

    The point is do you think that BKS can compete in the long-run with real technology companies that have innovation in their DNA? I'm skeptical.

    And I don't believe the physical delivery of books is going away, there is just a more efficient and profitable way of getting the product to consumers that Amazon figured out before BKS and BGP.

    Are the company's stock prices or performances telling you a different story?

    Is anyone a buyer of BKS or BGP here? Let me know. I would enjoy hearing your thoughts.

    Thanks,

    Andrew

  • Report this Comment On December 04, 2010, at 12:58 AM, kthup wrote:

    If the point is whether BKS can compete with real technology companies, the assumption is that everyone knows or agrees about what defines a real technology company and why BKS is not one. When it is acknowledged that BKS makes a good product and that the feedback about the product is positive, the point is not advanced. Writers on this site who address this topic continue to put forth assumptions and opinions which they seem to think should be obvious to all. If they don't believe the physical delivery of books is going away but that there is just a more efficient and profitable way of getting the product to consumers, it should not matter who initiated the process. What should matter is who can do it better now and whether they will continue to do it better going forward. Those questions could certainly be asked by the authors of the articles on this topic but they are not. The question that is asked is asked is, "Why compete?" The question defeats the purpose of doing business, which would seem to defeat the purpose of this website.

    BKS first entered the digital market in the 1990s, well before anyone else. The innovation was there, but the consumer was not. The consumer is now ready, and the market is a battleground. BKS share of the ebook market is approximately the same as Apple's share of the smart phone market, yet this website continues to sound a death knell. It's ridiculous and irresponsible.

  • Report this Comment On December 04, 2010, at 10:15 AM, susansisk wrote:

    I told my husband that the one thing I really wanted for Christmas is a Nook. I think it is a much better reader than the Kindle, and lighter, and cheaper than an ipad. I also like that it is interactive with the physical store. Wall St. doesn't seem to realize that many of us enjoy the atmosphere if the Barnes and Noble store.

  • Report this Comment On December 04, 2010, at 3:41 PM, pogicraft wrote:

    Yes, nookcolor is great. tell everyone you know and push the stock price to $17 so I can sell it =)

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