Barnes & Noble And Google: New Edge Or Trojan Horse?

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What separates Amazon (NASDAQ:AMZN)'s Fire HD e-reader tablet from Barnes & Noble (NYSE:BKS)'s e-reader Nook HD? Google (NASDAQ:GOOG) Android apps, at least until now.

Barnes & Noble Adds Android to the Nook

The bookseller has decided to add Google functionality to the Nook, including everything from the Android app store to Gmail and Google Maps. "The move would make the Nook HD seven- and nine-inch tablets more similar to rivals, such as Inc.'s Kindle Fire, which already offer Android apps," writes the Wall Street Journal. "The Barnes & Noble devices are priced between $200 and $300 depending on screen and memory size. Android's app store, known as Google Play, contains more than 750,000 apps, compared to the more than 10,000 now available on the Nook HDs."

Dark Clouds on the Horizon for Barnes & Noble

Barnes & Noble is trading at $17.77 off a 52-week range of $11.17 to $19.58. Analysts give the company a one-year target estimate of $18.40, which would mean a return of 3.5% off its current price, but they don't paint a good picture of the company going forward. The consensus puts Barnes & Noble's growth declining 42% this year, and declining an average of 167.10% per annum over the next five years.

In other words -- Barnes & Noble needed to take action. In an interview with the Wall Street Journal, Barnes & Noble CEO William Lynch said that the company realized it needed to broaden its offering after posting disappointing holiday sales. The move to add Android functionality to the Nook is a smart move. Google may just be able to save the bookseller -- maybe.

Could Google Save Barnes & Noble?

Allowing users to access Gmail, Maps and the Android store would help level the playing field with Amazon -- but there is also a major risk. The Wall Street Journal explains, "The Android app store includes's Kindle app, Barnes & Noble's direct competitor, which means Nook device owners will be able to buy and read Kindle titles, as well as digital books from Google Play."

Lynch dismissed the risk, saying "We think readers will continue to turn to us for reading, for their digital books and their digital magazines," but I think it is a heavy wager because Kindle books tend to cost less. For example, I did a search for Aldous Huxley's Brave New World on both Amazon and Barnes & Noble. Amazon is selling the Kindle version of the book for $7.39, while Barnes & Noble wants $9.99 for the same copy. The single advantage to a Nook user spending the extra money would be that he would be able to view the books he owns on the main screen rather than having to go through the Kindle app first. Personally, I don't think that is worth a 35% markup.


I think it is pretty likely that adding Google functionality to the Nook will mean that Barnes & Noble customers will jump ship for Amazon's lower prices. I say sell Barnes & Noble before its share price drops further and put the money in Amazon.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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