Google Inc (GOOG): Is The e-Reader Really Dead?

Page 1 of 2

Barnes & Noble, Inc. (NYSE:BKS) recently announced a new partnership with Google Inc (NASDAQ:GOOG) that will effectively catapult its Nook tablet from an e-reader to full-function tablet. Despite running on the Android platform, the Nook has been limited in its functionality as B&N struggled to maintain the distinction between its e-reader and the broader tablet market. In the company’s second partnership venture to try and save its Nook business — the first was a partnership with Microsoft Corporation (NASDAQ:MSFT) — the Nook will now incorporate the full suite of Google applications, including Chrome, Gmail, and the Google Inc (NASDAQ:GOOG) Play store. Given the current state of the tablet market, the move has the potential to work, but you may want to reserve judgment until the first round of numbers is released.

Is the e-reader really dead?
While both the Nook and the Amazon.com, Inc. (NASDAQ:AMZN) Kindle Fire series run on the Android platform, the Kindle will become the only “pure” e-reader left on the market. Both e-readers had defended their respective storefronts that operated outside of the broader Google Inc (NASDAQ:GOOG) family. Each thought that by piggybacking on the Android OS, but running an independent environment, they could better control content revenue and build a successful business model.

Google Inc (NASDAQ:GOOG)Amazon will continue to push this approach, and in doing so, become the last e-reader from a major manufacturer. The Nook is joining the Google family and will begin to compete with Google Inc (NASDAQ:GOOG)’s Nexus 7 as well smaller tablets from other providers. B&N CEO William Lynch said, “This goes a long way toward addressing what was perceived as a gap in our tablet offering.” Some of the dynamics this will create have the potential to create split loyalties.

Where does this leave Microsoft?
In an effort to push Nook sales, B&N sold a stake to Microsoft Corporation (NASDAQ:MSFT). The attempt was made to promote the device through the Windows 8 OS, but Nook sales still fell though the 2012 holiday season. The Google Inc (NASDAQ:GOOG) deal represents the newest attempt at creating the same type of catalyst.

The strange byproduct of these swirling partnerships is that Microsoft now owns an interest in a device that directly competes with its own Windows 8 tablets. On the one hand, the Nook is a small, low-priced entertainment device, where the Microsoft Corporation (NASDAQ:MSFT) Surface and other Windows tablets are directed at productivity and are only currently available in 10-inch varieties. On the other hand, Microsoft is competing with itself in a very real way. How this dynamic is addressed — if it is — may actually be telling of Microsoft’s view of the tablet market in general.



Page 1 of 2