When Amazon.com (NASDAQ: AMZN) announced on Tuesday that they would begin offering their Kindle e-reader through Staples Inc. (NASDAQ: SPLS) retail chains in addition to Target (NYSE: TGT), it was just the latest piece of good news for the company. A few months ago, investors were being told that the tablet PC market was about to make e-readers obsolete.
Between more retail outlets carrying their machine and a popular new low-cost model of the Kindle that’s racking up headlines in addition to sales, the e-reader market is looking a whole lot healthier than it was at the beginning of the summer when the Apple Inc. (NASDAQ: APPL) iPad was looming large. Both Amazon and Barnes & Noble (NYSE: BKN) are doing so well in fact, that they seem to have prompted Sony (NYSE: SNE) to ramp up their e-reader efforts by upgrading their whole line of devices.
Sony unveiled revamped versions of their Pocket, Touch, and Daily Edition e-readers yesterday, showing off devices that are smaller, lighter and that have all been upgraded with infrared sensor-equipped touch-screens that improve Sony’s historically unresponsive screens. (In the case of the Sony Pocket e-reader, this is the first touch-screen on the device at all.) Sony’s also improved the contrast of the e-readers’ E-Ink display, bringing the quality close to Amazon and Barnes & Nobles machines. Also similar to its competitors is the new iOS and Google (NASDAQ: GOOG) Android application of Sony’s e-book store Reader Mobile Edition. These are all smart choices to make the line of Sony devices appealing to the growing e-reader audience. The classic Sony blunder, however, is that they have raised the price on every model, bringing the Pocket up $30 to $179, just $10 less than the top of the line Kindle. They raised the price on the Sony Touch to $229, a $60 increase. These prices will guarantee Sony gets trampled by not just Barnes & Noble and Amazon, but also low-cost competitors in the tablet PC market, like Toshiba (LE: TOS), who announced their new Android-powered tablet the Folio 100 this past Monday.
They will also face competition from Samsung Electronics (LSE: SMSN) who revealed their new tablet computer, the Galaxy Tab, just this morning. The Galaxy, sporting a 7-inch screen, Google’s Android operating system, and functionality in line with Apple’s iPad, will launch later this fall and will, according to Samsung product executive Hankil Yoon, retail for between $200 and $300. With built-in WiFi communication, expected data plans from Sprint Nextel Group (NYSE: S), Deutsche Telekom (NYSE: DT) subsidiary T-Mobile, and AT&T (NYSE: T), and Android support from Sony’s Reader Mobile Edition, why would anyone bother to purchase Sony’s e-reader over a device like Samsung’s Galaxy Tab?
Of course, that begs the question: Isn’t it only a matter of time before cheap tablets completely obliterate the e-reader market? Even if Amazon and Barnes & Noble have had a momentary reprieve, isn’t their fate a foregone conclusion? With Samsung and Toshiba announcing affordable, Android-powered devices each week, in addition to even cheaper devices from smaller, private companies like ViewSonic, what hope to e-readers have? That all depends on whether or not Amazon, Barnes & Noble, and even Sony decide to transform their e-readers into tablets themselves.
A significantly possibility to consider as the tablet and e-reader marketplace continues to get crowded throughout this fall.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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