Will Microsoft Help Nook Overtake Kindle?

by Holly Shoemaker

Barnes & Noble (B & N) announced on Monday that it will partner with Microsoft in an attempt to make its Nook tablet more marketable.

Partnership Details at a Glance

Microsoft will invest $605 million over five years and gain a 17.6 percent share in B & N’s Nook market and its college bookstore. The newly-formed subsidiary is temporarily named NewCo. 

Benefits

The potential benefits tie into gaining market share:

• The move generates buzz for Windows 8, which launches in six months.  Microsoft also plans to discontinue its e-reader app in August 2012. NewCo will develop a Nook app for the touch-enabled Windows 8 operating system. While executives from neither side will confirm, it seems likely that future Nook tablets will run on a Windows-based platform, instead of the Android Market. In this sense, B & N is looking to Microsoft to establish itself to truly compete with Amazon just as Nokia has put its future in the hands of Microsoft for smartphones. In turn, Microsoft gets a chance to become part of the ever-growing e-book market. 
• The formation of NewCo shows that B & N and Microsoft understand the importance of gaining international market share. The needed cash that Microsoft has provided to B & N means the company has the ability to introduce the Nook bookstore on a larger scale.

Concluding Thoughts

The Nook has yet to truly rival Amazon’s Kindle Fire, and B & N could easily go the way of Borders. Partnering with Microsoft may become a risky move as Nokia is seeing in the smartphone market. It may come down to what platform future Nooks run on. If they run on a Windows-platform, they may see slower adoption just like the Window-based smartphones. 

Nook Tablet Sales Increase: B & N Cuts Prices on Nook Tablets

by Holly Shoemaker

Barnes & Noble (B & N) reported strong sales figures for its Nook e-readers and devices over the holiday quarter that ended on Jan. 28, 2012. Along with this news, B & N has announced it will lower the cost of its Nook tablets.

Numbers at a Glance

B & N reported the following:

• Nook business sales, including e-books and devices, increased by 38 percent. The increase led to the company generating $542 million in revenue.
• Physical book sales at the company’s 720 superstores increased by 4.2 percent.
• William Lynch, the company’s Chief Executive, reported that B & N now holds between 27 to 30 percent of the U.S. digital books market.

B & N’s Latest Strategy

• The company has lowered the price of its Nook Color e-reader to $162 from $199.
• In November, the company announced the Nook tablet will cost $199 – this is $50 less than the first version. The new tablet will have half the memory capacity of the first version, putting this Nook on the same footing as Amazon’s Kindle Fire in both memory and price.

Concluding Thoughts

Consumers will see if the above moves will benefit B & N in the long run. The company saw an increase in sales thanks to the demise of Borders in September.

When it comes to the ongoing tablet wars, a price decrease does not always generate sales. This move has not worked well for Research in Motion (RIM) and its PlayBook. B & N has also stated that it increased its sales, administrative and advertising costs from 25.3 percent to 34.1 percent a year earlier. By lowering the costs of its Nooks, and knowing the company needs to cover the increase in other costs, it is banking on consumer confidence. In April, B & N is expected to report $1.5 billion for the fiscal year. We should know then if these price cuts turn out to be a good move for this retailer.