Can Barnes & Noble Get its Footing in the Battle of the Books?

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The story of the Barnes & Noble (NYSE: BKS  ) e-book reader has reached a gloomy chapter. On one hand, it faces the rampant onslaught of rivals like the Kindle, while on the other hand, it has to weather the potential obsolescence of dedicated e-readers as tablet PCs flood the market. Plus, there’s that little thing about brick-and-mortar book stores disappearing off the face of the Earth.

The plot thickens
In order to put up a decent fight with’s (Nasdaq: AMZN  ) Kindle, B&N equipped the Nook color with what it feels could be crowd-swaying features such as email, in-page videos in books, and games like Angry Birds.

In the middle of 2010, B&N released an Android app for the Nook reader for use on Google’s (Nasdaq: GOOG  ) platform, and also offers its apps for Apple’s (Nasdaq: AAPL  ) iPhone and iPad. Nook users can also “read in store,” allowing you to browse through a book while in a B&N bookstore.  When you leave the store, the book disappears, which is a pretty cool feature, too. This was all part of a larger effort to compel the avid and recreational reader over into the B&N camp.

But how useful are all these gimmicks when it comes to the bottom line?

Retail hell
While trying to load up the Nook with all of the state-of-the art features and invest in its online operations, B&N’s net income suffered in the third quarter. At the same time, competition has not been standing still. Online retailers like Amazon, Apple, and Wal-Mart (NYSE: WMT  ) have been making a big push to seize control of digital reading. Plus, competition among devices has become much fiercer thanks to wide adoption of smartphones and tablets and increased accessibility of the Internet, which all act as a raw substitute for products like the Nook (and those heavy things I used to buy called books).

For consumers, the landscape is pretty rosy. It has become easier for consumers to compare prices from various stores before buying products. And we’re looking at a wider selection of more widely nuanced products. This has certainly not helped anyone on the business end of the spectrum -- and certainly not investors of B&N, either.

Fool’s story
It is evident that Barnes & Noble means business when it comes to stabilizing its position in the e-reader market. It is willing to take a fall in net income to get a footing in the battle of book retailers. This aggressive strategy seems to make sense, especially as the physical component of the business becomes less attractive.

In a world where the consumer is on a constant lookout for better shopping and consumption experiences, launching a full frontal attack with better services will probably get results. The only problem here is that with falling earnings, investors are probably going to be apprehensive about B&N’s stock. But if the company can turn the tide, there might just be good profits on the way. But be careful: first, a lot of things have to go right.

Arunava De does not own the shares of the companies mentioned here. Google and Wal-Mart are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers choice. Apple and are Motley Fool Stock Advisor recommendations. Wal-Mart is a Motley Fool Global Gains pick. Wal-Mart is a Motley Fool Income Investor pick. Motley Fool Options has recommended a bull call spread position on Apple. Motley Fool Options has recommended a diagonal call position on Wal-Mart. The Fool owns shares of Apple, Google, and Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (18)

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 May 04, 2011, at 8:45 PM, sepaton wrote:


    It seems as though you, Cindy and Alyce are all sitting in the same room as you post your poorly researched negative articles about Barnes and Noble. This is the 3rd fool article in about 10 days and they are all negative. I almost fell off my chair when you mention Walmart being one of the companies trying to "seize control of Digital Reading"... Really Arunava? Do you have any idea about the demographics of the Wal Mart clientele? Ok in case you don't let's just say there's not a lot of reading going on there. Oh there's probably plenty of competition in Digital content but Walmart won't be a player that's for sure.

    Your readers deserve to know that a 1 year lead in the eReader Color tablet segment is significant, and based on Amazon's announcement this week about their tablet likely not shipping until this fall, that's just what Barnes and Noble will have.

  • Report this Comment On May 05, 2011, at 8:35 AM, FtLLD wrote:


    Could you please provide a link to the Wal-Mart reading data that you referenced. I would be curious to get a look at the current baseline data so it can be compared against data over the next couple of years as economic factors have been changing the Wal-Mart "clientele" that you reference...

  • Report this Comment On May 05, 2011, at 9:46 AM, princessjade17 wrote:

    I love my NookColor, and it has done all I have wanted it to do. It is awkward not being able to close applications -- maybe a droid update down the road will take care of that?

    I do have to admit I am hooked on checking books out from the library (e-books) and have not as yet purchased any books other than maybe those $1 or up to $3.

    I wouldn't hesitate to purchase an e-book that I wanted to keep, however. I am just such an avid reader of fiction (I choose that over TV watching!) that I go through books so quickly. The library is the best option for me and my pocketbook.

  • Report this Comment On May 05, 2011, at 5:42 PM, David369 wrote:

    I like reading Sepaton's comments as much as the Fool articles on B&N. If by some miracle BKS shares actually take off the Motely Fool should allow him/her to publish an "I told you so" article.

  • Report this Comment On May 06, 2011, at 1:04 PM, zzeeman wrote:

    Stay tuned. Per recent headlines: May 24th BKS will unveil new e-book reader. Also Staples started selling the Nook Color recently. The digital battle rages on. Can BKS get a firmer foothold & make it pay?

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