The Forgotten Tablet

Douglas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As retailers begin to get fully prepped for the upcoming holiday season, the competition amongst tablet makers has reached a new level of intensity. Apple’s (NASDAQ: AAPL) release of the iPad Mini, offered at a starting price of $329, has focused recent attention on the less expensive range of the spectrum. In most reviews and commentaries, Apple’s smaller tablet is pitted against Google’s (NASDAQ: GOOG) Nexus 7 and Amazon’s (NASDAQ: AMZN) Kindle Fire HD, each priced at a starting price of $199. Strangely missing from the conversation is the very competitively equipped NOOK HD from Barnes & Noble (NYSE: BKS). The device has made a strong debut that should land the stock on your radar if not immediately in your portfolio.

The Pros

The NOOK HD distinguishes itself from other 7-inch tablets in two important ways: display quality and multi-user interface.  One of the few areas in which Apple has received criticism for the iPad Mini – other than a price 60% above the competition – is in display quality. For a company that has built a significant slice of its reputation on the “Retina” display, it came up short on the smaller device. The Kindle Fire HD has 30% more pixels than the iPad Mini, and the NOOK HD has 65% more pixels than the Apple device. For the same price as the other three iPad contenders, the NOOK HD is unmatched in picture quality.

Another feature that is unique to the NOOK is a feature the company calls Profiles, which allows every user to create a customized experience for him or herself. Each Profile contains content unique to that user that can be arranged according to specific preferences. Not only does this provide a more enjoyable experience, it allows each user to keep personal content private – a particularly useful feature for parents who share their tablet with kids. As the company points out: “ while 50 percent of tablet owners share their device with other members of the family, more than a third have content they don’t want anybody else to see.” This includes email and social networking content.

In designing the new devices, the company did extensive research to determine what functionality was most important to NOOK users: reading, web browsing, video, email and social networking were the top answers. The company’s Creative Director, Glenn Kaplan explains: “We ultimately zeroed in on something we knew was important to our customers and unique to these devices: they are at once totally personal and completely shareable.”

The Cons

Perhaps the single biggest shortcoming of the NOOK is the relative lack of a developed ecosystem. While compared to the Android and Apple ecosystems, even Amazon is struggling to keep pace, Barnes & Noble does not operate at the same level as the others. The company has adopted a very different approach: create a device that performs the core uses that its customers care about at the highest level possible. While you cannot download thousands of apps onto your NOOK, if you want a lightweight and easy to use tablet that will allow you to read books, watch videos and get online for basic tasks, it is hard to compete with the NOOK.

The Verdict

The NOOK has garnered a quiet following, but it has not received the widespread recognition that has been heaped on its peers. While potential shareholders should like to see this change – and it should with the recent release of a major new ad campaign – staying below the radar means that the devices are still carried in most major retail locations; Amazon has already been kicked out of the major discounters and there is speculation that Apple may be next. This could form the basis on a major competitive advantage, particularly since the device is most commonly compared to the Kindle.

Ultimately, Barnes & Noble has done an admirable job in ramping up its tablet. If it can get it mentioned in the conversation, the NOOK may become a competitive force. While I am not quite ready to own Barnes & Noble as a core holding, the stock continues to get more interesting and may be appropriate for many portfolios.

Mr. Ehrman has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple,, and Google. Motley Fool newsletter services recommend Apple,, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

blog comments powered by Disqus