Amazon, Barnes & Noble Enter Tablet Wars

Two rivals are opening a new chapter in the tablet wars this week with the release of competing devices. Amazon.com Inc. (Nasdaq: AMZN) shipped the first of its Kindle Fire devices yesterday. Barnes & Noble (NYSE: BKS) is expected to release its Nook Tablet on Thursday.

Both devices will sport seven-inch screens and WiFi-only connectivity. That puts them in a different class from Apple Inc. (Nasdaq: AAPL) iPads, which offer nearly 10-inch screens and, depending on the model, can connect to cellular data networks. But rather than dismissing the Kindle Fire and the Nook Tablet as lightweights, one consumer electronics watcher described them as contenders in a different type of fight.

Todd Day, an industry analyst with Frost & Sullivan, says he expects the tablet market to segment even more with the arrival of the Nook Tablet and the Kindle Fire. He compares this to the diversity in the smartphone market, which has high-end devices that cost $299 after subsidies from wireless carriers, as well as less expensive phones. "Consumers can buy a low-end smartphone for $29. Some are even free," Day said.

The release of the new devices will take Barnes & Noble and Amazon beyond the e-reader market and into tablet computers. The Kindle Fire, which costs $199, offers Web browsing, apps, music, videos, and e-books from Amazon. The Nook Tablet will retail for $249 with access to videos from Netflix (Nasdaq: NFLX) and Hulu Plus, music from Pandora (NYSE: P), Web browsing, and apps in addition to e-books.

More competition among tablet devices seems inevitable, given the evolution of other wireless devices. "The smartphone market started off with BlackBerry and other high-end devices that do everything," Day said. These days, consumers can buy gadgets such as the Peek 9, which sends email, text messages, and Facebook updates but does not include voice service. Or they can choose robust smartphones such as Apple's iPhone 4S and the Galaxy S II from Samsung Electronics Co. Ltd. (Korea: SEC)

Day expects a comparable mix among tablets. "Up to now, essentially you've had Apple. Samsung and Motorola have seen some success with their tablets, but obviously not the level of success that Apple's seen."

For the most part, the Xoom from Motorola Mobility Inc. (NYSE: MMI) and Samsung's Galaxy Tab devices have tried to compete in the same high-end market as Apple's iPad line, he said. But price can be a sticking point with consumers. Some manufacturers have produced tablets that feature seven-inch screens but cost nearly as much as rival devices with 10-inch screens. "They've been typically within $100 of an iPad."

That kind of pricing strategy can work against tablet makers. When shoppers buy new laptops, Day said, many would pay the extra $100 for a larger screen if portability were not a major deciding factor. "All of the prices to this point have been too high on the seven-inch tablets."

The Kindle Fire and the Nook Tablet may redefine the market with their lower prices, he said. "There are quite a few more people who don't have a tablet than do. A lot of that comes down to the financial aspect," since such consumers balk at spending nearly $1,000 on a tablet.

With Black Friday fast approaching, the Nook Tablet and the Kindle Fire may arrive just in time to land on holiday wish lists. "Tablets are probably going to outsell any other electronic devices through the holidays," Day said. "Having a tablet is just cooler."