In the stock world, Barnes & Noble (NYSE: BKS) doesn’t even occupy the same stratosphere as Amazon (Nasdaq: AMZN). Barnes & Noble’s stock price hasn’t approached $40 in at least five years whereas Amazon’s stock has a 52-week low of $156.77. Comparing the two is like comparing apples and oranges.
But that hasn’t stopped Barnes & Noble from trying to go toe-to-toe with Amazon in one key area starting this month: electronic tablets. Barnes & Noble is set to debut its new Nook Tablet, a mobile device with a 7-inch touch screen that allows users to watch movies, listen to music, read books and check their email, among other functions. It hits the shelves in Barnes & Noble’s 700 U.S. bookstores next week.
Interestingly, next week is also when Amazon will start shipping its own electronic tablet, the Kindle Fire. Like the Nook, the Kindle Fire has a 7-inch touch screen, offers movies, apps, games and books, and allows for ultra-fast web browsing. With the holiday season fast approaching, the two devices will be in direct competition with one another. Game on.
The question is: Can a mobile device created by a brick-and-mortar bookselling operation with a market capitalization of $852 million (Barnes and Noble) realistically compete with an online electronics shopping giant with a market capitalization of $96 billion (Amazon)? If the Nook Tablet is everything Barnes & Noble CEO William Lynch says it is…perhaps.
Lynch called the Kindle Fire “deficient.” He said that the Nook is a superior product with way more memory space. In that regard, he’s right: The Nook has 16 gigabytes of memory, double the Fire’s 8 gigabytes. According to product reviewers, the Nook is also faster than the Fire, has a brighter screen, weighs less, and will theoretically have better customer service since Barnes & Noble has the advantage of actual stores, unlike Amazon.
But here’s the catch: at $249, the Nook is $50 more expensive than the Kindle Fire’s $199 price tag. Lynch insists the price difference is justified given all the features the Nook has that the Fire doesn’t. But will extra memory space and a brighter screen be enough to convince shoppers to shell out an additional $50 when deciding between two products that are otherwise virtually identical?
Time will tell. Meanwhile, both devices will have the added pressure of competing with Apple’s iPad 2. Granted, at $499 the iPad is a higher-end tablet that appeals to a wealthier demographic. Still, enough people are willing to spring for a product made by Apple that it will undoubtedly steal some sales away from both the Nook and the Fire.
For now, though, the introduction of the Nook Tablet has been a boon for Barnes & Noble’s stock. Barnes & Noble’s stock price has risen 24 percent, to $14.65 a share, in the last two days. That’s fast approaching its 52-week high of $15.38.
While Barnes & Noble will never be able to compete with Amazon and its vast financial resources, its willingness to get into the mobile device game and go head-to-head with the big boys is a sign that it isn’t afraid to alter its business model in these ever-changing times. That’s the sort of mentality that can improve earnings in a time when the Barnes & Noble’s book sales are sharply declining.
And if the Nook Tablet can hold its own against the Kindle Fire this holiday season, its stock may continue to rise.