Who Will Win From Best Buy-Amazon Deal?

Best Buy says it will carry Amazon's Kindle. Who will benefit the most from this deal?
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NEW YORK (

TheStreet

) --

Best Buy

(BBY) - Get Report

has announced that it has struck a deal with

Amazon

(AMZN) - Get Report

to sell its Kindle and Kindle 3G in stores this fall. But which retailer needs the deal more?

As the

e-reader wars

heat up, Amazon has been searching for ways to ensure its relevancy. The Internet retailer has cut the price on its device several times following similar moves from rivals like

Barnes & Noble

(BKS) - Get Report

.

Amazon has also extended the reach of its Kindle, partnering with

Staples

(SPLS)

and

Target

(TGT) - Get Report

earlier in the year to sell the device in their stores.

Best Buy, which already has a deal with Barnes & Noble as the exclusive seller of the Nook, simply adds to Amazon's mission.

Of course, Amazon has been the leader in the e-reader world since it launched its first Kindle back in 2007. But as new devices roll out, including

Apple's

(AAPL) - Get Report

iPad, it has lost some of its head start advantage.

Amazon has reduced the price on its Kindle by $70 to $189 and also began offering a Wi-fi only model for just $139. It also sells the Kindle DX for $379 from the original price of $489. In comparison, when the first Kindle debuted in 2007, it was priced at $399, and by last year dropped 35% to $259.

While Amazon still won't reveal exactly how many of the devices it has sold, it did say Kindle sales tripled in its second quarter, and sales of e-books outpaced that of hardcovers for the first time.

On the either side of the deal, Best Buy has fallen out of favor with the market. With second-quarter earnings due out on Sept. 14, analysts are forecasting that sales deteriorated slightly throughout the quarter, with weakness in TVs and PCs.

Netbooks have been a positive for the electronics retailer for 29 consecutive quarters, but companies are starting to report a slowdown in sales of the device.

Analysts are calling for a profit of 46 cents a share on revenue of $11.65 billion in its second quarter.

"Given inventory levels out of the first quarter, the need for a healthy cut to guidance, the structural product challenges, and significantly harder sales comparisons in the second half, we are cautious heading into next week," J.P. Morgan analyst Christopher Horvers, wrote in a note. "At this point, we think the best the long crowd can hope for is a short covering on 'better than feared.'"

There's no arguing that a Best Buy/Amazon deal is the right move for both companies. While the two tend to be competitors, both selling big-ticket electronics and other gadgets, Best Buy would be hard pressed to shun the Kindle from its e-reader display.

Maybe the better question to ask, is how the deal will impact Barnes & Noble and if the book retailer will make yet another move to push the Nook to the forefront.

-- Written by Jeanine Poggi in New York.

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