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Barnes & Noble Nook: That other tablet — and a $1 billion business

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As I and others have argued, there is no tablet market — there's an Apple iPad market. That said, the Amazon Kindle Fire has come on strong, suggesting that there may be room for an iPad competitor at lower price points (the Kindle Fire sells for $199). We know that consumers will go ga-ga over a cheap tablet that as designed to compete with the iPad. This is why the HP Touchpad found life at $99 and why the BlackBerry PlayBook may gain users if it goes on sale for around the same price. But these were tablets that were envisioned as $500 iPad killers. Who wouldn't want one at a monster discount?

Then there's Barnes & Noble's Nook. There are several models, but the Kindle Fire/iPad competitor (in as much as the iPad can really have a competitor) is the Nook Tablet, priced at $250. Here's where things get interesting. B&N is talking about spinning the Nook off as it's own company. And as DealBook reports, Nook Inc. could be worth almost $1 billion:

John Tinker, an analyst at the Maxim Group, estimated in a research note on Thursday that at a highly conservative valuation of 0.6 times revenue, the Nook company could be worth $900 million. But he adds that a higher multiple, perhaps at least one times revenue, may be called for, given the high growth rate.

There is a question, of course, of whether Barnes & Noble will proceed down this path at all. It has announced efforts to reshape its business mix in the past, only to see those attempts peter out. In 1999, the company took its Web site public, using the proceeds to market the Web site. (Even then, the portal’s sales were dwarfed by Amazon’s.)

The Nook is kind of stuck in the middle of the tablet market — the neglected middle child. Amazon can pump superior content into the Kindle Fire and afford to sell it at what's probably a loss. Apple doesn't care about producing content for the iPad, so it can be happy, very happy, to take its cut on owning the preferred tablet platform, forcing publishers and entertainment companies to fork over 30 percent for the privilege.

B&N doesn't really have either of those advantages (although like Amazon it does have digital media to sell). But it does have a device that consumers seem to like well enough. Year-over-year holiday sales of all Nooks were crazy good, increasing by 70 percent. 

The rest of B&N, unfortunately, is an albatross around the Nook's neck. So the spinoff idea might be the best way to save the most successful part of the company and free it up to grow. 

Then again, this isn't an iPad. So let's not get too excited.

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