Barnes & Noble unveils a $199 tablet
The bookseller announces a cheaper Nook to take on Amazon's Kindle Fire.
Bookseller Barnes & Noble (BKS) reported so-so third-quarter earnings before the open this morning. But the real news is its decision to raise the stakes in its war of attrition with Amazon (AMZN) in the low-end tablet market.
The company announced a $199 Nook Tablet featuring eight gigabytes of memory, which complements the $249 16-gigabyte model that debuted in November. The bookseller also cut the price of its Nook Color e-book reader by $30, putting it at $169, though that's not as important as the Nook Tablet pricing.
That $199 price point on the Nook tablet puts it right in line with Amazon's $199 Kindle Fire tablet.
So let's do some math on the tablet market.
Here's a market share breakdown for the fourth quarter of 2011, courtesy of our friends over at Strategy Analytics:
After this data was issued, Peter King, author of the Strategy Analytics report, told Laptop Magazine that the Kindle Fire and Nook Tablet accounted for 40% of the Google (GOOG) Android slice. This means it has taken 16% (40% of 39% is about 16%) of the overall tablet market.
If we back that 16% out of the 39% figure that represents the full Android slice, the remaining 23% is divided up by the likes of Samsung, Motorola, and others.
And since that 23% figure includes low-end Android models, Apple's (AAPL) 58% share tells us that it is probably at least three times as big as the rest of the high end of the tablet market.
Moving on, the Amazon versus Barnes & Noble price war may be great for consumers, but it is incredibly damaging for the Android marketplace because they are undercutting the competition on price while conditioning consumers to expect cheap tablets.
Remember, Amazon and Barnes & Noble are pricing these devices on the cheap in order to get people into their digital-content ecosystems. They don't care about making money on the devices, and that's disastrous for anyone else trying to make money in low or moderately-priced tablets.
As for who's going to win this war, my money is on Amazon -- a stock which I am incidentally betting against.
My thinking is pretty simple here.
Amazon is a unique company in that it doesn't seem to care about profits. It spends like mad to gain market share and build its revenue base, and I wouldn't put it past the company to take the Kindle Fire down to $179 or $149 in the near future. And in a war of financial attrition, the size of one's wallet and sheer willingness to lose money are what count.
And outside of the tablet pricing issue, in what is one of the most under-covered stories in the business media, Amazon is vertically integrating the book business by signing publishing deals with best-selling authors like Tim Ferriss.
Barnes & Noble has banned books published by Amazon Publishing from its retail stores, putting itself in a bit of a pickle.
Sooner or later, Amazon Publishing will have some blockbuster book that won't be found in Barnes & Noble stores. This could prove especially disastrous should Amazon gets its hands on the next "Harry Potter" or "Hunger Games" series. (See: For Lions Gate, "The Hunger Games" is "Guitar Hero" all over again)
Barnes & Noble reported earnings of 71 cents a share, below consensus of 96 cents. Excluding the dilutive effect of convertible preferred stock owned by Liberty Media and the deferral of textbook rental revenue, earnings would have been 99 cents per share.
Revenue rose 5% year-over-year to $2.44 billion, which was slightly below consensus. Same-store-sales rose 2.8%, while college sales fell by 3% due to a shift to lower-priced textbook rentals.
BN.com sales were up 32% year-over-year. The company saw a decline in online sales of physical products, while sales of Nook devices and digital content were up significantly.
For comparison, Amazon's December quarter sales were up 35%, with media sales up 15%.
On the guidance front, Barnes & Noble reiterated the then-disappointing outlook it announced on Jan. 5. (See: Barnes & Noble: Nook sales are great, but they're killing us!)
More from Minyanville:
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.