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B&N: Nook has 25 percent of U.S. e-book market

In reporting earnings, Barnes & Noble's CEO William Lynch says the company has captured 25 percent of the U.S. e-book market

Marketing and developing the Nook has cut into profits. Barnes & Noble

In reporting its earnings for the third quarter that ended on January 29, Barnes & Noble has had some good and bad news.

First the bad: the company's profits were down 25 percent from the previous quarter last year as it continued to invest heavily in its Nook e-reader line. It posted a $60.6 million profit ($1 a share) compared with $80.4 million ($1.38 a share) in the year-earlier period. From a marketing and R&D standpoint, competing against the likes of Amazon, Apple, and Google, takes big bucks and Barnes & Noble has now canceled its dividend to free up some cash to continue building out its digital services.

As for the good news, revenue was up 7 percent to $2.3 billion compared with the year-earlier period and the company claims it now owns a 25 percent share of the e-book market in the U.S.

"We intend for Barnes & Noble to be a leader in the exploding market for digital content," said William Lynch, Barnes & Noble's CEO. "We now represent 25 percent of the e-book market in the U.S., larger than our share in physical books. We sell twice as many e-books as all formats of physical books combined on"

As is the custom of both Amazon and Barnes & Noble, Lynch didn't cite any specific sales figures in deriving that 25 percent number, but thanks to the strong showing of its Nook e-readers, it seems fairly certain the company's got a firm grasp on second place in the U.S. e-book market. Last year, it said it had 20 percent of the e-book market while Amazon said it had 70-80 percent of the e-book market.

In the wake of Border's filing for Chapter 11 bankruptcy and closing 30 percent of its stores (200 altogether), Lynch said that Barnes & Noble is looking at possibly opening stores at a "small number" of those shuttered Borders locations, even as physical books sales continue to decline and it closes some of its own stores. The company has had some success diversifying into educational toys and games and it plans to expand those offerings in some stores.

Much like Apple has done with its retail locations, Lynch sees the company's physical stores as the key to selling more Nook e-readers, as customers can handle the devices and have experienced salespeople explain their features.

He did not say when Barnes & Noble planned on updating any of its e-readers or when it would add an app market to the Nook Color. That app store is expected any day with an upcoming update.