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What: Shares of Barnes & Noble (NYSE:BKS) were getting crushed today, falling as much as 12%, after its quarterly earnings report came up short.

So what: It wasn't all bad for the inveterate bookseller, as earnings per share actually topped estimates. Analysts had expected a loss of $0.06 per share, but the bookseller delivered a $0.04 EPS loss, and actually had a positive net income when preferred dividends are factored out. However, the Barnes & Noble story has become the Nook story, and losses on the e-reader expanded in the quarter. Sales in that division grew by 6%, and digital content jumped 38%, but expenses also increased by 10%. Overall sales for the company also declined slightly.

Now what: The bookseller's stock had gained about 40% since September 10, so today's pullback could be partly a correction. The new Nook HD and HD+ tablets also came out after the quarter ended; it could see a spike in sales during the holiday season to counter last quarter's extra expenses. Still, profits will be hard to find in the e-reader arena as long as market leader Amazon.com (NASDAQ:AMZN) is content to sell its Kindle at rock-bottom prices. B&N seems to be making all the right moves, but the competitive disadvantage it has in occupying decreasingly valuable real estate may be its ultimate undoing.

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Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services recommend Amazon.com. 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.