Barnes & Noble Nook HD+ Tablet's major components

Barnes & Noble Nook HD+ Tablet

We look at how Barnes and Noble has managed to pack so much in the relatively cheap Nook HD.

How brutal are things getting in the tablet market? Let's see if we can get some help answering that by looking inside the Barnes & Noble Nook HD+, released by the US book retailer just before last Christmas.

Although not yet available in the UK (a mooted deal with Waterstones failed to emerge), the Nook HD+ highlights the general obstacles facing others who would compete with Apple's iPad, Samsung's Galaxy or Amazon's Kindle lines ' and then there is the plethora of less familiar players exploiting tumbling production costs.

Barnes & Noble's revenue model for its Nook line has been largely based on 'giving away' the hardware and hoping to recoup that subsidy through content sales - typically e-books, magazines, movies, apps and music. In that respect, its approach is broadly the same as Amazon's. An alternative model, as practiced most notably by Apple, sees the devices as profit centres in themselves.

The received wisdom is that the subsidies are working for Amazon (just!), but it's less clear if that is the case for Barnes & Noble.

"The Nook offering seems to have a lot less interest than these other tablets," says Andrew Rassweiler, IHS's senior principal analyst. "In the third quarter of 2012, IHS iSuppli estimates that all Barnes & Noble Nooks combined came to a paltry 0.6 per cent share of unit shipments in, putting them in 16th place between Huawei and Pandigital. About 150,000 units in all."

With its 8.9in, 1,920x1,280px HD resolution sticking to the subsidised model, Rassweiler feels the Nook HD+ may be "Barnes and Noble's last shot at relevance".

As a model match with Amazon's similar-sized Kindle Fire HD, Barnes & Noble has priced its alternatives at least $50 lower at $269 against Amazon's $314 for the 16GB version, and $299 against $384 for the 32GB version.

It's also worth noting here that the IHS teardown of the Kindle showed that this is now achieving a modest profit against its bill of materials. By contrast, the Nook HD+ has an estimated BoM of $262, before manufacturing, software, licensing and marketing costs.

At the same time, there is relatively little differentiation within the electronics design. It is based on the same Texas Instruments (TI) processor as the equivalent Kindle (the 1.5GHz OMAP4470 based on a dual-core ARM Cortex) and shares a number of other key components from the same supplier.

Some of the key slots TI has secured in the Nook include all of the power management components, those for Wi-Fi and Bluetooth functionality, and the HDMI companion IC, and many others.

This suggests that much of the Nook-specific design has been carried out by Barnes & Noble's contract manufacturing (EMS) suppliers - Inventec and Wistron - leveraging a now very common TI reference design.

A further factor is that while the EMS companies may, in themselves, be able to get some discounts on parts because of their greater overall buying power, those that they pass on to Barnes & Noble are still unlikely to be as deep as those given to Amazon.

One notable feature of the Nook HD+ is that, like the Fire, there is an innate efficiency to the design itself.

The two tablets have almost the same component count: 593 components for the Nook against 569 for the Kindle Fire. This is significantly lower than, for example, the average smartphone (about 1,000 components) or the iPad Mini (about 925 components).

"This is not entirely surprising, considering that both designs are based on the same TI OMAP processor series and supporting ICs," says Rasswiler. "But while this design and the Kindle Fire HD have impressive simplicity, the reduced component counts in both cases, to some extent, are the result of a fairly limited feature sets.

"For example, were Barnes & Noble to add the LTE functionality now being seen on other tablets, this would add a significant component count and cost to the device."

In short, the Nook HD+ will likely see Barnes & Noble continue to struggle to lift its share. Certainly, foreign partners would help it beyond an increasingly competitive US tablet market. The problem, however, is that any non-US bookseller could just as easily create its own device. Or it could simply set aside store and online space to offer tablets from other vendors and let them scramble for diminishing margins.

"Barnes and Noble will likely learn the hard way," says Rassweiler. "In 2013, anyone can build this hardware or have it built and make it look good. But what other motives can Barnes and Noble give potential Nook consumers? Not many. Not to mention the fact that the Barnes & Noble world footprint is limited to the US. This offering seems ultimately doomed as does the business model."

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