Barnes & Noble Inc will sell its Nook electronic-book reader at Best Buy Co Inc, expanding distribution as it faces growing competition with the entry of Apple Inc's iPad.
The deal will put the $259.99 Nook in Best Buy's 1,070 stores beginning on April 18. Best Buy will be the first and only chain to carry the device other than Barnes & Noble, the largest U.S. specialty bookstore chain, putting the electronics seller at the center of the fast-growing e-reader market.
The exclusive deal calls for Best Buy to also include Barnes & Noble's BN eReader software on some of the personal computers and smartphones it sells. Currently, the Nook is available at Barnes & Noble's website and 723 bookstores.
The deal with Best Buy will greatly increase the Nook's availability and ability to compete with the recently launched iPad, a portable computing and entertainment system that also functions as an e-reader and is sold at Best Buy in addition to Apple stores.
Along with the iPad and the Nook, Best Buy also sells Sony Corp's Reader. The other major player in the e-reader wars, online retailer Amazon.com Inc, sells its market-leading Kindle on its own web site.
This partnership provides them (Barnes & Noble) with an additional distribution channel, which is critical to driving sales of the Nook, said Michael Souers, an analyst with Standard & Poor's Equity Research.
Souers, who maintained his sell recommendation on the stock but raised his price target to $19, said that the sale of the eReader software was the more important part of the deal because it would spur sales by increasing the number of devices on which Barnes & Noble's e-bookstore is available.
Unlike Amazon, whose downloads are not compatible with competing e-readers, Barnes & Noble's e-bookstore is device agnostic -- meaning owners of the iPad or Sony's Reader can download titles from the site.
Barnes & Noble shares closed down 52 cents or 2.3 percent at $22.25 on the New York Stock Exchange. Best Buy rose 34 cents or 0.8 percent to $45.23.
BEST BUY A DESTINATION
Best Buy is working to differentiate itself from the likes of Amazon and Wal-Mart Stores Inc, and the Nook deal helps set it apart in a fast-growing electronics segment.
It's an important category for Best Buy, said Ross Rubin, an executive director of industry analysis at research firm NPD Group. Best Buy definitely wants to establish itself as a destination for new technologies.
Apple said last week that it had sold about 450,000 iPads in its first few days.
Barnes & Noble and Amazon don't provide sales figures for their e-readers, but each claims its device is enjoying robust sales.
Barnes & Noble launched the Nook in October, aiming to take on the Kindle and Sony Reader in time for the holidays; but the device only arrived in stores in February after a number of production delays.
The company is focusing on the growth of the e-book market to overcome a long-term sales decline in physical books.
In a research note on Monday, Goldman Sachs forecast that U.S. sales of e-books would rise by 47 percent per year to reach $3.2 billion by 2015, or 12.8 percent of total book sales, up from 3 percent this year. Goldman expects physical book sales to slip 1 percent per year over that period.
Goldman also forecast that Apple's share of the e-book market would jump to 33 percent in 2015 from 10 percent this year, while Amazon's market share would fall to 28 percent from 50 percent. Barnes & Noble is expected to snag 15 percent of e-book sales in five years, up from 5 percent in 2010.
Last month, Barnes & Noble named William Lynch, who oversaw the development and launch of Nook, as chief executive officer. During the holiday quarter, comparable sales at Barnes & Noble's physical stores fell 5.5 percent, while online sales surged 32 percent.
(Additional reporting by Brad Dorfman in Chicago; editing by Gerald E. McCormick, Lisa Von Ahn and Bernard Orr)