Why is Barnes & Noble SLASHING Nook Prices?

The tablet market has been a one-horse race for a while now and rivals to Apple’s (NASDAQ:AAPL) highly successful iPad are facing the obvious pressure. But while Google (NASDAQ:GOOG), Samsung, Microsoft (NASDAQ:MSFT), and Amazon.com (NASDAQ:AMZN) go on bravely by announcing new and forthcoming products, one manufacturer is being forced to rethink its strategy more drastically. Barnes & Noble (NYSE:BKS) has announced it is dropping the prices of its Nook tablet line. The $169 Nook Color will now sell for $149, while the price of the 8 GB and 16 GB versions of Nook tablet will fall to $179 from $199 and $199 from $249, respectively.

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Nook has faced added pressure in its size segment with the arrival of Google’s Nexus 7, which costs $249 or $199 depending on the memory, while Apple is also widely expected to announce a new 7-inch iPad soon as well. Microsoft has not offered many details of its upcoming Surface tablet, but still adds to the pile of worries for Barnes & Noble.

While Barnes & Noble has used its bookstores to finance the Nook business and commands a 27 percent share of the e-book market, second only to Amazon, the model does not seem financially sustainable for much longer. The Nook division announced operating losses of $286 million in the 2012 fiscal year ending in April to add to its $230 million loss in fiscal 2011. Microsoft announced a $300 million investment for a 17.6 percent stake in a joint venture with Nook earlier this year, but it’s still unclear how the deal with shape up.

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