iPad and Kindle killing Barnes & Noble

B&N created an app to sell books to iPad users, but the move is just another futile grasp at the e-book industry

By InvestorPlace Mar 15, 2010 8:53AM

electronic book stocksBarnes & Noble (BKS), not prepared to play second fiddle to Amazon (AMZN), rolled out its own Nook electronic reader last year to compete directly with the Kindle.

Now, the bookseller is going head-to-head with Apple (AAPL) by releasing an app that will sell titles for download to the iPad.

(Find out the other latest Apple rumors here).


Barnes & Noble clearly won’t go down without a fight. However, the sad reality is that the company is going down -- scuffle or not. Shares had been dropping like a rock for years before the financial crisis, and its latest earnings report a few weeks ago shows a stock on the decline.


Here are the latest numbers: On February 23, Barnes & Noble reported fiscal third-quarter profit fell 6%, and same-store sales were down 5%. Earnings estimates for the current quarter project a brutal 74-cent share loss, even worse than the -4 cents reported in the same period of 2009.


Ouchie. B&N did say that its Nook electronic reader boosted online sales by nearly two-thirds for the latest quarter, and the company’s CEO claimed the Nook was his firm's "single best-selling product." But we’ll apparently have to take his word on it, since the company won’t provide specific numbers due to the "strategic nature" of the e-book business.


Amazon.com has clearly established itself as the world’s #1 bookstore. Amazon's book sales are an astounding 35% of all books sold in the U.S., including both print and e-book versions. It’s runaway success with the Kindle has also made it an early leader in the emerging digital books industry. Though the Nook has won decent reviews, it doesn’t have nearly the name recognition or buzz that the Kindle does.


The Apple iPad is probably the only realistic threat to the Kindle, and only because it provides a depth of use that Apple fans have come to expect from the company’s products. And with the loyal gadget-heads who would drive an Apple automobile to work if the company made one, there is a built-in demand that will give the iPad a running start.


That leaves Barnes & Noble stuck painfully in the middle on the hardware front.


It may be possible for B&N to sell some titles to Kindle and iPad users, but it better be able to do so with an obvious angle -- better pricing, added features or perhaps some social media gimmick like a “book club.”

Besides the fact that Amazon and Apple both have a vested interest in keeping their users buying digital books from them, how could a third-party sales interface ever be easier to use than hardware and software built to work in tandem? The iPad’s partnership with the Apple iBookstore and the Kindle’s seamless integration with Amazon.com’s digital library seems difficult for an outside company to top.



Barnes & Noble had already been experiencing hard times as hard copies of books yielded smaller and smaller margins, and digital music sales and streaming movie providers like Netflix (NFLX) at away at CD and DVD revenue. Shares topped out at over $46 in early 2006, and have dropped steadily over the last four years and haven’t traded above $29 since the financial crisis in late 2008.


Barnes & Noble is doing everything it can to stay relevant as the publishing industry changes dramatically due to electronic book technology. Unfortunately, that still may not be enough.




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