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Barnes & Noble's Nook: Life Preserver or Dead Weight?

Barnes & Noble's Nook: Life Preserver or Dead Weight?

Barnes & Noble may be taking some big heat from Amazon's Fire. Although the bookseller says Nook sales were up last holiday season, it's also been forced to make some costly investments in the platform. Now Barnes & Noble is wondering whether it just might be better off without Nook. Meanwhile, RIM may get a boardroom shuffle, Yahoo has a new boss and Google gets caught cheating.

By Paul Hartsock TechNewsWorld ECT News Network
01/07/12 5:00 AM PT

The arrival of the Amazon Kindle Fire gave Apple reason to worry, but it may have given Barnes & Noble a reason to completely freak out. Its Nook Tablet Android device arrived about a month after the Kindle Fire was announced, and the Nook may be in a much more vulnerable position than the iPad. iPad still owns the top end of the tablet market, but down in the sub-US$300 realm, the Nook has to fight with a cheaper Kindle Fire that just happens to be hooked up to Amazon's giant ocean of digital content.

That's not to say the holidays were especially cruel to Barnes & Noble this year. It claims that total Nook sales rose 70 percent during the holiday season. On top of that, store sales had a modest gain, perhaps thanks to the death of Borders.

But Nook is a heavy burden to carry, and it seems the bookstore knows the Fire is going to take a bite out of its sales estimates. The company recently cut its fiscal 2012 forecast for Nook sales from $1.8 billion to $1.5 billion. It also told investors to expect a loss of $1.40 per share for its fiscal year ending this summer, more than double what Wall Street had been expecting, and it partially blamed that figure on investments it's making in Nook.

In fact, the bookseller is now mulling whether it should spin Nook off as its own company. The e-reader and e-book business is very different from the business of selling actual, made-of-paper books, and the development and strategy for the two may require such different approaches that they don't even belong in the same company.

However, if Barnes & Noble really does lop off Nook and tell it to go live on its own, it could be cutting itself off from the best part of its business. Stock owners weren't happy with any of this news. The day the company made its announcements, its share price got pounded down about 20 percent. Perhaps investors are worried that without an e-reader line in its pocket, Barnes & Noble could start looking a lot like a certain dearly departed archrival.


Listen to the podcast (12:18 minutes).

Do It Yourself

Google intends to create its own line of branded tablets, if recent reports and an offhand comment from Chairman Eric Schmidt are any indication. Schmidt told an Italian newspaper last month that a Google tablet would be forthcoming in the first half of 2012; later, a Digitimes report indicated such a device would arrive in March or April and that it would rival the Amazon Kindle Fire in price.

First, a disclaimer: It's not that Digitimes is wrong every single time it posts something like this, but it does publish a lot of anonymously sourced info, some of which never actually pans out. These reports get Digitimes lots of citations from other publications, and it's not like anonymous gadget rumors are some kind of sacred taboo in the world of consumer technology. Just don't bet large sums of money on them.

So, a Google tablet -- doesn't Google already make tablets? Not quite. It makes Android, various versions of which run on tablets, and gadget makers like Samsung and Motorola make tablets using Android. But these new rumors focus on what would be a Google-branded tablet, sort of like how Google brands its Nexus line of Android smartphones. Presumably tablets would take a similar route: Get a decent OEM to build it, then stamp a big "G" on the back and load it up with a pure and untouched version of Android.

But what about content? The two most popular tablets on the market right now -- iPad and Kindle Fire -- are both associated with monster content stores: iTunes and Amazon, respectively. What's the Google version of these content mainlines? Well, Google Music is here, though it's still kind of getting off the ground. It has YouTube, but so does everyone else. Google Books isn't really the same thing as Kindle or iBookstore. But it does have the Android Market, which is a huge and growing source of apps. And maybe Google doesn't need to be the main content provider if it can hook the user up via the right apps. For example, do you necessarily need to go with the tablet maker's own bookstore if you have access to a Kindle app?

Price is where things might get tricky. The Digitimes report states that Google is going to try to sell its tablet for less than the Kindle Fire, which goes for $199. Amazon can afford to sell its tablet for that little because it figures Fire users are going to buy lots of stuff from Amazon -- digital content and orders for physical goods. But Google doesn't sell stuff the same way. Google mostly sells ads. So if it decides to sell Nexus Pads or whatever for under $200 each, where does its big payout come from?

Then again, Google's already invested huge resources in Android, which it gives away for free in order to have a big mobile presence. So go figure.

Meet the New Boss ...

Ever since Yahoo unceremoniously ousted Carol Bartz from its CEO office four months ago, the company's been the subject of an endless series of rumors focusing on buyouts, sellouts and even taking the company private. It's been rudderless for a third of a year, though some would say it's really been much longer than that.

Well you can forget about the buyout rumors -- for a few minutes anyway -- because Yahoo just tapped a new CEO. It's Scott Thompson, formerly of PayPal.

Judging from his experience, Thompson seems like an above-all safe bet. He has plenty of online business experience, and he even doubled PayPal's user base over the course of a few years while he was at the helm. He seems to be really into the data Yahoo has access to, touting that as one of the company's prime assets. So if Yahoo wants a stabilizer who can focus on turning around ad revenue, figuring out ways to squeeze money out of data, and keeping the ship from sinking much further, it may very well find what it's after in Thompson.

But some were hoping Yahoo's leadership void would become an opportunity to grab a real wild card. They wanted someone with big vision, ready to radically alter everything about Yahoo, strip it down, and build it back up as a completely redesigned company. That doesn't sound like what the board has in mind with Thompson. Maybe they don't think they're so far down the rabbit hole that a go-for-broke visionary is really what's called for just yet.

Anyway, Wall Street wasn't exactly enthusiastic -- investors knocked 3 percent off Yahoo's value by the end of the day. But maybe they'll give some of that back if Thompson can reverse the bleeding for a while.

Breaking Up Balzaridis

The leadership structure at Research In Motion could perhaps be described as "extra special." Instead of having one person as CEO and another as chairperson, it has two guys who both serve as cochairs and coCEOs: Mike Lazaridis and Jim Balsillie. Lazaridis also happens to be RIM's founder, and both of them own large piles of RIM stock.

This arrangement makes for some interesting dynamics. The pair claim the fact that they're both chairs and both CEOs is good for business. But it also runs the risk of allowing them to be about as autocratic in their leadership as the heads of a publicly traded company can possibly be. Both leaders play both parts, and they generally walk lock-step with each other.

Under the right conditions, that could be a formula for incredible success. Maybe in some parallel universe, RIM's bad-boy CEOs squish the status quo with every step they take. But in our world, RIM is floating aimlessly down a river of filth. Its PlayBook has flopped, its next-generation phones -- or phone, I should say -- won't be coming out until late this year, and it's chalking up quarter after quarter of losses. This has caused a lot of teeth-griding among its shareholders, but it seems they have to scream extra loud in order to affect any kind of change whatsoever, all because of the titles of RIM's two top guys.

But maybe they've finally screamed loud enough. The Financial Post has reported that Balsillie and Lazaridis may be dragged kicking and screaming out of the chairman's seat by the end of the month.

If true, this would be the result of complaints made last year by some of RIM's largest investors. They demanded an independent chair, and in June, RIM promised to form a committee to look into whether that would be a good idea. That committee's findings will come out Jan. 31, and according to the Financial Post report, board member Barbara Stymiest is the leading candidate to replace Balzaridis.

However, even if she does take the wheel, a change in chairperson alone won't be enough to fix RIM. It's going through a transition that looks so painful it's raised questions about whether the company will survive at all. And just because you ex out the word "cochairman" from their business cards doesn't mean that Balsillie's or Lazaridis' influence at the company will really fade.

But maybe RIM's loss can be your gain. You want a cheap tablet? RIM just gave its PlayBook a big price cut, taking the erstwhile $500-and-up slate down to $300. Oddly enough, it seems all PlayBooks are listed at the same new price, regardless of whether they're 16, 32 or 64 GB models. That doesn't do much to dispel any suspicions that this is a last-ditch effort by RIM to dump its inventory and wash its hands of the product -- or that it's a panic move in the wake of Amazon's rampaging $200 Kindle Fire sales.

Them's the Rules

Internet companies that come into contact with Google's ad policies quickly learn, either the easy way or the hard way, that Google won't hesitate to punish you with lousy page rankings if you break the rules. They also learn what a pain it can sometimes be to comply with those policies.

Example: One system Google uses, called "Panda," dictates a number of rules regarding so-called low-quality posts. Posts fitting the search engine's definition of low quality need to carry a special "nofollow" tag. Neglect the tag, and your whole site could get knocked off Google's radar. Basically, it's code that lets Google know this content isn't worth putting at the top of search results, and in general it helps Google give its users answers to their queries that aren't bogged down with crappy, brainless content that shoddy sites churn out in hopes of gaming the SEO system.

Funny thing about those rules, though: Sometimes content gets passed through such a long chain of custody that even Google itself ends up breaking them. It was reported recently that one component of an ad campaign for Google's Chrome Web browser used a technique that violated its very own paid link policy. Apparently it had partnered with a company called Unruly Media to drive traffic to a Chrome promotional video. But a blogger Unruly hired to help drive those hits failed to attach a nofollow link.

It's not like the incident's earned Google a Netflix level of backlash from the general public. The inner workings of SEO are a little inside-baseball. But it was very upsetting to SEO professionals -- people whose jobs are to make their sites comply with every little rule and edict that Google and other search engines declare in order to maximize traffic. If Google had shrugged this off with a casual "oops," it could have seriously damaged SEOers' trust in the company. And no, they probably wouldn't have been able to do a thing about it, because Google would still be this gigantic Internet mega-corp that no SEOer can afford to ignore.

But it appears Google's decided to do the honorable thing. Soon after the problem was highlighted in the media, Google's Matt Cutts stated that although the violation was an accident, Google would still take action against itself the same way it would against any other violator. He said Google would demote its own Chrome browser webpage for at least 60 days.

Sure enough, at this moment, a search for "browser" on Google's main search engine will result in Firefox, Opera and Safari as top results, but Chrome is now buried deep below the surface.


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