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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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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.