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I've been trying to make sense of the new Nook Color announced Tuesday. The good news is, Barnes & Noble (NYSE:BKS) positioned the product away from the two market leaders, the Kindle (NASDAQ:AMZN) and the iPad (NASDAQ:AAPL). The bad news is, the Nook Color is neither an e-reader nor a full-fledged tablet, and the existence of a market between these two segments is unknown at best.

Nobody is quite sure what to make of it — which is either a problem or an opportunity. Can it compete with the A-Team?

Kindle Wireless Reading Device, Wi-Fi, 6" Display, Graphite - Latest GenerationCompared to Amazon’s Kindle, Forrester analyst James McQuivey claimed “This move puts B&N ahead of both Amazon and Sony.” It’s got color, a touch screen, a faster screen and (presumably) genuine browsing experience. It’s also twice the weight, almost twice the price, is limited to laptop-type battery life and has a fraction of the (paid) content.

Gartner and eWeek say the Nook Color competes directly with Apple’s iPad. It has a color LCD touchscreen that’s almost the same resolution as the iPad and a CPU that’s almost as fast. It’s also half the price and 8 oz. less. However, it’s a read-only device, with almost no apps, and a (as yet unproven) web browsing capability.

Kindle
Kindle DX
Nook
Nook Color
iPad
Screen
6" grayscale
9.7" grayscale
6" grayscale
7" color
9.7" color
Resolution
600x800
824x1200
600x800
600x1024
768x1024
Autorotate
X
X
X
X
Touchscreen
no
no
partial
yes
yes
Size (in.)
7.5 x4.8 x.33
10.4 x7.2 x0.4
7.7 x4.9 x0.5
8.1 x5.0 x0.5
9.6 x7.5 x0.5
Weight (lbs)
0.53
1.18
0.72
0.99
1.50
Memory
4 GB
4 GB
2 GB
8 GB
16 GB
CPU
532 MHz
400 MHz
≤667 MHz
800 MHz
1 GHz
PDF
X
X
X
X
X
EPUB
X
X
X
AZW
X
X
MP3
*
*
X
X
X
OS
Android 1.3
Android 2.1
iOS 3.2
Price (WiFi)
$139
$149
$249
$499
Price (3G)
$189
$379
$199
$629

Compared to other Android devices, it’s aggressively priced with obsolete software. It runs a modified version of the Android 2.1 found in the Nexus One and Droid X, among others. Someday it will run the Android 2.2 of its nearest Android rival, the Samsung Galaxy Tab.

It is not clear if either will run the next release after 2.2 (either Android 2.3 or 3.0), which isrumored to be the OS actually recommend by Google (NASDAQ:GOOG) for tablets.

Apple reported that the iPad shipped about 7.5 million units at $500+ each in its first six months. Amazon won’t be honest about its sales — other than vague claims about more than ever — but analysts are estimating 5 million to 6 million Kindles total for all of 2010.

Although Amazon is far more US-centric than Apple, that figure still seems much too low, given the Kindle is 1/3 the price of an iPad. In backing a format, publishers care more about the software than the hardware. All the evidence I’ve seen is that the books-per-reader is much higher on the Kindle than any other device, befitting Amazon’s focus, product design and online catalog.

I’m not sure why B&N is keeping its 2009 Nook on the market, since it’s now quite long in the tooth. Perhaps (as rumored) it will get an Android OS update someday. Or perhaps B&N wants it to use it to generate traffic and upsell the color product.

Even so, it seems to be gambling that the color e-book market will be valuable soon — either with magazines or “children’s books.” (A $250 e-reader for preschoolers? There’s a niche market!)

Against the iPad, it has an MP3/AAC player and (according to the glossy brochure from my local B&N) supports Pandora music streaming. But there’s no Flash yet and no word on any other video streaming — either due to codec availability, processor power or business model lockout.

With all this I can imagine a use case for which the Nook Color justifies its premium over the Kindle and is good enough to undercut the iPad. This would involve reading PDFs, some Android-based magazine apps and maybe a few ebooks, light multimedia usage via the SD card slot and — most importantly — web pages.

To me, the big unknown is the web browsing. With the iPhone, Apple stole almost a three year lead on its smartphone rivals by taking web browsing seriously. None of the other tablet makers have demonstrated that same quality of web experience.

Tuesday’s intro event left the actual browser performance in doubt. As one report put it:

The Nook Color also runs Android’s Web touch browser, but participants at the hands-on event were carefully kept away from actually touching it.

New niche or not, if it can’t browse web pages at my local library or Starbucks, there’s no Nook in my immediate future.

So it’s new, and it’s different. The B&N catalog and distribution should be enough for now to keep it differentiated from its Android rivals, if not the rest of A-team.

However, it seems a little pricey to put under the Christmas tree, and the gap between it and the iPad will only widen when the iPad 2 is (as expected) announced early next year.

The one thing nobody has mentioned is textbooks, both at the high school and college level. Color is de rigueur for the millineals (no Kindle) but price is important too (sorry iPad). If B&N has a braincell in their body, they’ll hire a direct B2B salesforce to hit the ground January 3 to peddle the Nook Color from their600 college bookstores for on campus classroom use.

Source: Barnes & Noble's Nook: New Niche?