They're Coming at the iPad From All Directions

Barnes & Noble (NYSE: BKS  ) isn't backing down now.

The meandering bookseller is beefing up its Nook line, lowering prices of its e-readers now and hitting the market with the Nook Tablet next week.

Two days after Amazon.com (Nasdaq: AMZN  ) rolls out its Kindle Fire at $199, B&N is hitting consumers with its bar-raising entry-level tablet.

The retailer is hoping that customers will value spec sheets over price. Its new tablet will feature double the RAM and initial storage capacity of the Kindle Fire. Nook Tablet will also have access to a ton of third-party apps and come pre-loaded with programs to stream Netflix (Nasdaq: NFLX  ) , Hulu Plus, and Pandora (NYSE: P  ) .

The $249 price point would've been a steal before Amazon's Kindle Fire splash. Tablet makers have had a difficult time taking on Apple's (Nasdaq: AAPL  ) iPad on specs, so coming in at half of the iPad price -- even if this is a much smaller gadget that obviously lacks Apple's rich ecosystem -- will turn heads. The real battle here, though, will be with Amazon for the low end of this market.

Will $50 be a deal breaker for cheap tablet buyers? The more pressing question, given B&N's ugly financials: Can it turn a profit with Nook at $99, Nook Color at $199, and the new Nook Tablet at $250? Superior specs mean higher costs for the tablet, and Amazon already issued a bleak outlook for its holiday quarter, warning that it may even post an operating loss for the period. So if the Kindle Fire and traditional e-readers for as little as $79 find Amazon on the brink of a blue Christmas, how red will B&N's holiday cheer be?

The bookseller doesn't really have much of a choice. Its brick-and-mortar business is dying. Its latest quarter was a mess. Sales actually fell by 11% at its superstores and college bookstores if you back out the gains for its Nook and digital downloads. In other words, it has to keep pushing deeper into e-readers and tablets if it wants to avoid going Borders on its investors.

B&N would have probably loved the luxury of higher price points, but Amazon is there to keep prices down. Amazon isn't hungry in the same way that B&N is starving. B&N's financial future now rests on the Nook. Amazon simply wants to dictate the digital migration experience to back up its well-rounded ecosystem of digital books, video, games, and music.

The holidays just got a bit more interesting.

If you want to follow this saga, track the latest news by adding Barnes & Noble and Amazon.com to My Watchlist.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com, Apple, and Netflix, as well as creating a bull call spread position in Apple. 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.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber and shareholder since 2002. He does not own shares in any of the other stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (3) | Recommend This Article (3)

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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 November 07, 2011, at 2:36 PM, H3D wrote:

    "They're Coming at the iPad From All Directions"

    So what's new? Yawn...

  • Report this Comment On November 07, 2011, at 4:32 PM, lucasmonger wrote:

    Yet, it seems that the damage caused by the Nook and the Kindle Fire is going to be lackluster sales of the Xoom, Playbook, Galaxy Tab etc. iPad 2 sales continue to be strong, although it wouldn't surprise me if sales taper down a bit because everyone went out and bought a new iPhone during the past few weeks or is waiting for iPad 3 sometime next year.

  • Report this Comment On November 07, 2011, at 4:38 PM, johnybottom wrote:

    I want a tablet - I only have a desktop.

    I'm waiting 'til next year for an iPad3.

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