Can e-readers compete with newcomer iPad?

SAN FRANCISCO — When Apple launched the iPad earlier this month, some analysts began ringing the death knell for so-called e-readers — most notably, the popular Amazon Kindle.

"The iPad makes things much more difficult for e-reader devices," said Colin Sebastian, an analyst with Lazard Capital Markets who has followed the e-reader market. "Especially when you're a higher-priced e-reader, then the value proposition becomes less clear."

Still, many companies are making bets on the e-reader business. And analysts say those bets could still pay off, depending on how they are executed.

IDC estimates about 2.5 million e-readers were sold in 2009, and that number is expected to double to 5.1 million this year.

Those estimates have attracted several players to the market, with more coming. This year's Consumer Electronics Show (CES), which took place in January, showcased several such devices, which targeted market niches ranging from book and newspaper readers to business users.

The Kindle, from Amazon.com, rules the e-reader market with an estimated 60 percent share, according to estimates from Forrester Research.

Sony is believed to have accounted for 35 percent of the e-readers sold last year, with other vendors splitting the rest.

Worries about the iPad's effect on the Kindle have helped to weigh down Amazon's stock this year. The shares are up 4 percent since the first of the year — an underperformance compared with the Nasdaq Composite, which has gained more than 8 percent in the same period.

Future still golden for some

But many analysts see a strong future for dedicated e-readers — depending on price, content and other factors that could help them stand out to consumers.

First and foremost, most e-readers are priced at a sharp discount to the iPad, which starts at $499. The Kindle and its rival device called the Nook — sold by Barnes & Noble — both start at $259.

Sony sells a model called the Reader Pocket Edition for $199, with a touch-screen version priced at $299.

Others, though, have little space from the iPad. IRex, a reader that went on sale at Best Buy earlier this year, sells for $399. Plastic Logic, a venture-backed startup, introduced an e-reader at CES that it planned to start at $650 for a model that offers only Wi-Fi connectivity, or $800 for one that can access a 3G wireless network.

The Plastic Logic QUE was planned to launch this month, but the company delayed the release until June 24 "in order to fine-tune the features and enhance the overall product experience."

On Friday, Barnes & Noble said it plans to roll out a software update for the Nook that will let users surf the Web and play games.

An ability to browse complete books in Barnes & Noble stores for up to an hour a day at no cost, better Wi-Fi connectivity, faster page turns and better touch-screen navigation are also part of the upgrade.

Barnes & Noble's Nook uses Google's Android operating system. When it was launched, executives said Android applications could be developed for the Nook. The games, which includes chess and Sudoku, are the first Android applications.

Price competition

Forrester analyst Sarah Rotman Epps says e-readers will have to compete with the iPad mainly on price because there is no way for them to offer the same capabilities.

"We do see a role for a stand-alone e-reader, but it's not going to be a premium price point," Epps said in an interview. "They will have to get under $99 to get the mainstream market."

Ross Rubin of the NPD Group agrees, adding that markets such as textbooks remain largely untouched by e-readers and have a lot of potential.

"We are still very early in this market, which is still expanding," Rubin said.

Weight could be a factor

Besides price, analysts believe e-readers can set themselves apart from the iPad in other ways.

Product design is one area. While the iPad is widely hailed for its sharp design, one disadvantage is its 1.5-pound weight, which is more than double the weight of the 10.2-ounce Kindle. This would be a serious issue for those looking to use a Kindle or iPad for long-form reading.

"Weight is an attribute that's easy to overlook," said Rubin. "If you have an extra pound on your laptop, you won't be feeling it most of the time. But if you have an extra pound on a tablet device, you will certainly feel that."

Adding a color screen is another. While fine for book reading, devices with black-and-white screens are unlikely to be a draw for readers — and publishers — of newspapers and magazines, who are all gravitating toward the iPad. Color screens using E-Ink technology are not available yet but are in development.

"In this market, we don't think it's sufficient for Amazon to go with only a black-and-white Kindle," said IDG analyst Susan Kevorkian.

E-readers such as the Kindle, Nook and Alex from Spring Design will have another advantage through ties to big retailers. The Alex will be sold through retail chain Borders later this year. The iRex and Sony e-readers are sold through Best Buy.

Kevorkian, of IDC, believes Amazon will benefit from having its Kindle app available on the iPad — especially because its own e-reader does not have a color display. "The Kindle app lets the company get into the business of selling color content," she said.

Still, few analysts believe the current number of e-reader devices on the mark is sustainable, especially with more tablet devices on the way. Hewlett-Packard, Dell and Google all have them in development.

"We're not going to have a market where 30 different e-readers survive," Sebastian said.