Demise of the E-Reader is Looming, and Microsoft Windows May Be Next

Last Updated Jun 21, 2010 5:00 PM EDT

Today, Amazon (AMZN) announced that it had dropped the price of the Kindle e-book reader from $259 to $189. It was the clear reaction to Barnes & Noble (BKS) dropping the price of its Nook reader to $199 and the introduction of a Wi-Fi only model at $149.

However, this isn't brilliantly aggressive pricing at work. Both companies are panicked because they can smell the demise of the pure e-book reader. Given where smartphones and the Apple (AAPL) iPad have gone, the argument for specialized devices that do anything from GPS-based location finding to e-book reading has crumbled away. As vendors chance the market for powerful and cheap computers, they will leave Microsoft behind.

At the end of April, my colleague Damon Brown noted the fundamental problem facing the consumer electronics industry in the context of GPS manufacturers:

What's clear here is that these devices sound a lot like iPads or iPod Touches, but just a tiny bit cheaper -- and without all the email, games, productivity software, or apps that make Apple's products so versatile. And besides, it's a shot in the dark: When it comes to GPS, as Time and Engadget implied, no one really cares about the fancy stuff. The average GPS consumer wants to get from point A to point B as simply and cheaply as possible. For Garmin, the strange Garmin-Asus Nuvifone smartphones confuse the brand even more, as they aren't strong enough devices to make a dent in the crowded handset market.
Given what an portable device running Apple iOS or Google (GOOG) Android can do -- at prices that are at about two-and-a-half times more than an e-book reader. Why purchase a limited-use device when a bit more gets a far more versatile platform? You'd think that manufacturers would innovate and adapt, but as my BNET colleague Lydia Dishman notes about the e-book device market, the companies may not even see the real problems that face them.

The mobile vendors have shown that a machine can combine mid-sized screen, significant computing power, and long battery life. Mobile no loner means simply mobile. It means full- and multi-featured. That's not only bad news for the dedicated e-reader companies, but for PC-centric companies, particularly Microsoft (MSFT). People purchased laptops for a lack of another choice of portable machine. Then came netbooks. Now smartphones and tablets will push them out of the way as well.

Already long-standing Microsoft partners HP (HPQ), Dell (DELL) and Acer are rumored to be considering Chrome OS as an alternative to Windows for tablets and netbooks. Dell has already confirmed its interest. Toshiba, which has announced a dual-screen pocket-sized notebook, is selling the device for an outrageous $1300. The company also announced an Android-based thin laptop.

The vendors will move to free operating systems that can give them a better chance to drop prices and compete, because much of the market will remain sensitive to cost and the price of hardware will continue to drop to nothing. Microsoft had a good run, and might have had a chance once to prevail as the market changed, but the company was too devoted to keeping things as they had always been, and now, barring a miracle, it's too late to avoid the extinction of its former importance.

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Image: Flickr user stephenhanafin, CC 2.0.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.