Barnes & Noble's new tablet keeps it in the game

NEW YORK Mon Nov 7, 2011 4:16pm EST

1 of 6. The new Nook Tablet is seen during a demonstration at the Union Square Barnes & Noble in New York, November 7, 2011.

Credit: Reuters/Shannon Stapleton

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NEW YORK (Reuters) - Barnes & Noble Inc introduced a new Nook to compete against Amazon.com Inc's Kindle Fire, entering the lower-end tablet war with a device that has more memory and speed but also costs $50 more.

Barnes & Noble will charge $249 for the Nook tablet, which has 16 gigabytes of storage compared with the 8 gigabytes of storage offered by Amazon's recently introduced Kindle Fire tablet. The new Nook will is set to hit the shelves late next week, setting up a holiday season battle between the Nook and Fire, which also ships next week.

Barnes & Noble also lowered the price on other Nook devices to keep pace with Amazon's aggressive pricing.

Barnes & Noble, which operates about 700 U.S. bookstores, does not have the deep pockets Amazon has, but its devices have found a niche among book buyers interested in e-readers and tablets rather than pure tech aficionados.

"We are serving the core reader first," Lynch told reporters at the presentation in New York, comparing the Kindle Fire to "a vending machine" for Amazon's myriad services beyond books.

Lynch called the storage offered by the Fire tablet "deficient" and said the Nook Tablet's extra speed, memory and in-store customer service justified the higher price.

But some analysts said shoppers may balk. "The $50 price difference is significant. You're talking about a 25 percent difference," NPD analyst Ross Rubin told Reuters.

The Nook tablet has a 7-inch screen, weighs less than one pound, offers nine hours of video viewing and works with Netflix Inc video libraries and the Hulu Plus streaming service. It also has a 1GHz dual-core processor and one gigabyte of RAM.

The struggling bookstore chain has poured tens of millions of dollars into developing Nook since the first version of the e-reader was introduced in 2009.

The strategy has paid off, winning the chain about 25 percent of the e-reader and digital books market -- though it is still a distant second behind Amazon -- and helping it contain the damage from the long-time decline in book sales at its stores.

Despite entering the e-reader market two years after Amazon did, Barnes & Noble has held its own. Its Nook Color had some tablet-like features, attracting customers that were not ready to pay up for a full-blown tablet, and its touchscreen reader was launched in May, months ahead of Amazon's Kindle Touch.

Barnes & Noble shares were down 2.4 percent to $11.33 in afternoon trading on the New York Stock Exchange. The stock slumped on September 28 after Amazon unveiled its tablet at a lower price than Barnes & Noble's top e-reader at the time, the Nook Color.

NICE PRODUCT, BUT NO GAME CHANGER

Early reviews of the Nook Tablet were positive, with Forrester Research analyst Sarah Rotman Epps calling it a "wow" product.

Technology blog Engadget's editor Tim Stevens said "the Nook Tablet seems to be nicer hardware than the Fire."

Still, no one was saying the Nook Tablet was a Fire-killer. Instead, it's a device that gives Barnes & Noble customers who prefer the Nook to stay put.

"This keeps Barnes & Noble shoppers loyal, and the 'light' tablet segment is still growing," said Morningstar analyst Peter Wahlstrom, referring to tablets less expensive than Apple Inc's iPad. "Barnes & Noble doesn't want a price war, and this bolsters its image as a seller of premium products."

Engadget's Stevens predicted that consumers of both devices "will stick to their party lines."

Barnes & Noble did lower prices on some devices, a tacit recognition of the pressure Amazon put on it in September, when it slashed the price on its basic Kindle and introduced a screen touch reader that was cheaper than Barnes & Noble's.

Barnes & Noble on Monday cut the price of the Nook Color to $199 from $249. But that raised the threat of Nook devices cannibalizing each other.

Barnes & Noble also cut the cost of its touchscreen Nook to $99, down from $139, matching the price of its Amazon counterpart.

"They are (pricing) the Nook Color at $199, so for consumers looking at that price point, Nook Color may wind up being the stronger direct competition to the Kindle Fire," NPD's Rubin said, but noted that the Nook Color could end up eating into Nook Tablet sales.

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