David Pogue reviews the Barnes & Noble Nook electronic reader at the New York Times, and finds it a poor competitor to the Kindle for identical features, while its unique features don't measure up to a real difference.
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Of course, Apple remains the 800-pound gorilla in the room, since as much as the Nook may not match up to the Kindle, the Kindle doesn't really match up to the iPhone/iPod touch either, and were Apple to release a tablet with a larger screen at a competitive price, it would likely destroy both the Kindle and the Nook.
And honestly, I don't think either Amazon or B&N would really care that much - both are booksellers, not gadget-makers, and would probably do well to focus on their core businesses.