Barnes & Noble Inc on Tuesday unveiled its electronic reader in a challenge to Amazon.com Inc's dominant Kindle, featuring a color screen and the same $259 price, ahead of the holiday shopping season.

Barnes & Noble said it would allow its users to share most books, a function that the Kindle currently does not allow. The device, dubbed the Nook, will use AT&T for wireless and Google Inc's Android mobile platform.

The Nook will be available at Barnes & Noble's nearly 800 U.S. stores in late November. Shoppers could pre-order the device from the bookseller's site on Tuesday.

The nascent electronic reader market -- arguably built by the Kindle although Sony Corp was first to market -- has turned into a key battleground for the consumer electronics industry this holiday season.

Some 3 million e-readers are expected to be sold in the United States this year, with sales doubling in 2010, according to Forrester Research.

Retailers, electronics manufacturers, publishers and wireless operators are all hoping to gain a toehold in what is expected to be the transition of books to a digital format, not unlike music and newspapers before them.

Barnes & Noble is unique in its use of a dual display and color. A smaller color display -- positioned below the main display for reading that uses e-Ink technology for easier reading -- allows users to browse the company's bookstore and click on titles.

The Nook can hold 1,500 books -- equivalent to the Kindle. But it lacks a web browser, currently an experimental function in the Kindle.

Barnes & Noble said that most of its titles can be lent for up to two weeks to friends, a function that should be attractive to users who do not want to be limited by a proprietary system like Amazon's.

In addition, the Nook's titles can be viewed on a variety of devices, such as the Blackberry from Research in Motion Ltd, Apple Inc's iPhone, PCs and Macs and others.

That sound you heard was the air being let out of the Kindle's tires, wrote Gartner Vice President Allen Weiner on the technology research company's blog.

Weiner, reached by phone, said the pre-holiday timing was right for the Nook, as many consumers have been delaying a purchase, knowing more e-readers would hit the market, including rumors of a possible tablet device from Apple.

The timing works very nicely with Barnes & Noble to come in with a device priced competitively with Amazon that supports open standard, he said.

The impact of that (open standard) is so big, he added. This is a game changer.

SUPPORTS EPUB FORMAT

The Kindle, which has taken a page from Apple Inc's dominance in the digital music industry, operates on a closed system in which books ordered on Amazon can only be read on the Kindle, or on the iPhone or iPod Touch.

Barnes & Noble said it was supporting the ePub format, a publishing standard allowing users to read content on multiple devices, as well as an antipiracy protection from Adobe Systems Inc.

Sony, whose Sony Reader features a touchscreen, is shifting its digital bookstore to these standards by year's end.

The debut of the e-reader follows Barnes & Noble's launch of an online digital bookstore this summer that it touted as the world's largest, with over 700,000 titles. The Kindle store offers more than 350,000 titles.

Analysts say Barnes & Noble's advantage could be in its nearly 800 physical stores across the United States where users will be able to test out the device. The Nook will connect via WiFi while the user is in the company's brick and mortar stores, allowing users to access special content and promotions.

Also important is Barnes and Noble's existing relationship with publishers, although Amazon, too, shares that advantage -- one that analysts say Sony, for example, does not enjoy.

While the Sony Reader currently is estimated to hold the No. 2 position, behind the Kindle, other devices include Interead's Cool-er and the Cybook OPUS from Bookeen.

Other e-readers expected to hit the market soon include devices from iRex Technologies, a spin-off of Royal Philips Electronics, Taiwan's Asustek, a Hearst-backed venture called FirstPaper, and Plastic Logic, whose QUE reader due in January is geared to business professionals.

E-reader hype has hit a peak in the past month, as Amazon rolled out the Kindle internationally, Google Inc unveiled plans for an online e-book store, and News Corp's Rupert Murdoch visited Asia, possibly to investigate e-reader technology.

Barnes & Noble shares rose 10 cents after closing down nearly 6 percent to $18.90 on the New York Stock Exchange.

(Editing by Richard Chang, Steve Orlofsky, Phil Berlowitz)

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