From Book to Nook!

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

Editors Note: The previous version of this article states that the Amazon Kindle does not come with web browsing and apps. This has been corrected. 

Barnes & Noble (NYSE: BKS), the world's largest bookseller, posted a modest profit for its second quarter fiscal 2013 against a loss in the same quarter a year ago, despite a drop in revenue at the stores.

Barnes & Noble reported earnings of $2.2 million, up from a year-earlier loss of $6.6 million.  On a per-share basis, the loss was 4 cents a share, up from a loss of 17 cents in the same quarter a year ago. Revenue dipped 0.4% to $1.88 billion, while sales in its fastest-growing segment, Nook’s digital business —including Nook devices and e-books—jumped 5.6% to $160.3 million on a 38% surge in digital content sales. Unit sales of the Nook doubled during the four-day Thanksgiving weekend, primarily by increased pricing promotions from other retailers. One of the factors that contributed to an increase in sales of the Nook was the decision by some of the largest retailers to stop selling Kindles, as they viewed Amazon (NASDAQ: AMZN) as a serious competitor when it comes to consumer goods.

Retail revenue slid 2.9% to $996 million, reflecting store closures and lower sales at its online store, College bookstores saw sales inch up 0.4% to $773 million due to new store growth. Still, the gross margin rose to 25.5% from 24.9% a year ago, because of the expanded educational toys and games selection that the retailer has been building over the past two years, as well as the sales of higher-margin books

In the recent quarter, this New York-based company announced two new breakthrough tablet products: the 7-inch Nook HD and 9-inch Nook HD Plus, both of which provide customers with the best reading and entertainment experience possible. It has lowered the prices on last year's Nook Tablet models to $179 (16GB) and $159 (8GB), and reduced the price of its entry-level Nook Color to $139. It also launched Nook app for Windows 8, introduced the new Nook U.K. bookstore, and launched the Nook Video service – all this will help further fuel the growth of the company’s digital content business in the future.

Barnes & Noble faces a tough competitor in Right now Barnes & Noble's strategy is to do everything that Amazon does, but to do it later. Basically, it is emerging as the “anti-Amazon.” The latest move from Barnes and Noble comes as they announced the launch of their own E-book reader to compete with Amazon's popular Kindle.

It also faces tough competition from Google's (NASDAQ: GOOG) Nexus 7 and Apple's (NASDAQ: AAPL) iPad.  Google shipped its Nexus 7 at the price of $199, and has proven to be a good competitor to the Nook reader. Also, Google is now expanding its reach to various markets, where people could not bask in the joy of having a Nexus 7, and one of the first such markets is Australia. Packed with the power of Android Jelly Bean, Nexus 7 is slowly and steadily becoming a favorite among tablet users.

As for Apple, the most recent 8-inch iPad mini has not been able to really catch up well with the techies. Available at a hefty price of $329 (this is the lowest) for a 16GB WiFi-only model, people are hesitating to purchase it, as it does not quite justify its valuation. Apple’s iOS has always been a hit with consumers, but if Apple wants to get things right with its latest release, it should work on fixing hardware and pricing-related issues.

What really separates the iPad, Nexus 7, and Kindle Fire from the Nook is the fact that the former devices offer more than an e-book reader; they've also got web browsing, apps, etc. But, this does not necessarily make the Apple, Google, and Amazon products the definite better choices.

B&N is also offering its own curated magazine, newspaper, book and app stores - and plans to add a video service offering movies and television shows by early 2013. Nook is becoming a standout element in the company’s portfolio and should continue to win market share among consumers and in retail stores.

In the times of stiff competition, which has become the order of the day in technology business, Barnes & Noble has painted a good picture on the numbers front. Nook’s digital business has been climbing well, and if B&N can sustain innovation and creativity in its products along with a good price range, Nook should turn out to be a game-changer for the company. I would like to place a bet on company’s strategies and management confidence as it is moving into the digital arena after it has huge success at its large retail outlets.



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