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E-Books Are Hot, So Why Did E-Ink Sell for So Little?

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The Kindle DX uses E-Ink technology
The Kindle DX uses E-Ink technology

Prime View International, a Taiwanese company that makes an e-readers display part, said today it would purchase E-Ink, a company that provides the digital ink technology in the Amazon Kindle (s amzn) and Sony Reader, (s sony) for $215 million. The two companies have been partners in developing the Sony and Amazon e-reader products, and the deal highlights PVI’s attempt to own the top provider of an essential technology for the growing e-reader market.

And there’s no question the market is growing, with research firm In-Stat noting today that e-readers will grow from almost 1 million shipments in 2008 to 30 million by 2013. PVI quotes data from DisplaySearch noting that the total e-paper market will be $3 billion by 2013, which will be used in e-readers as well as e-textbooks. However, despite optimism about the growth rate for both e-paper and e-ink, the investors who funneled $150 million in Cambridge, Mass.-based E-Ink since its spinout from MIT 12 years ago, don’t seem to have generated a great return on their exit, given the sale price. Investors include Intel Corp. (s intc), Motorola Corp. (s MOT) and Hearst Corp.

A company release noted that E-Ink had sales of $18 million for the first quarter of 2009, which means that it sold for about three times annualized revenue. That may be because while e-books are now gaining mindshare, the overall sales of devices and books on such gadgets are still miniscule compared with those printed on dead trees. If E-Ink’s exit through this acquisition is a sign of what’s to come, that may bode ill for the venture firms backing Plastic Logic, which has raised more than $100 million. Plastic Logic last week showed off its own e-reader built using different technology. Its backers include BASF Venture Capital, Morningside Technology Ventures, Intel Capital and Amadeus Capital Partners. If venture backers can’t command big multiples from their investments in the e-paper and e-ink market, it may also mean that investors will be loath to back other startups that may try to commercialize e-paper and e-ink efforts inside university or corporate labs.

Still, Forrester today also published a report highlighting the growth of e-readers, and laying out a timeline of when new product features may hit the market (see chart). The report also notes that the e-reader market is getting crowded as technology firms such as Apple (s aapl), whose iPhone runs several popular e-reader programs, and Google, (s goog) which today announced a program allowing publishers to sell digital copies of their books through the Google site, also build products that could siphon off buyers of e-readers.


15 Responses to “E-Books Are Hot, So Why Did E-Ink Sell for So Little?”

  1. fearless_fool

    My guess about the low valuation: it may be less about the market potential of the e-ink technology and more about investor fatigue. E-ink has been slogging away for 12 years, perhaps the investors’ LPs want to see a return in their lifetime. (I personally think the technology and future potential is great.)

  2. WarLord

    E-books software (the books) are too expensive as compared to dead tree editions. E-books will make head way when they are priced at a multiple something less than trade paperback until then they’re an amusing curiosity

    The hardware is too pricey the e-editions are too pricey and too much free stuff on the web tnat i can read on my netbook…

  3. why do people want color and multimedia? e-Ink is a replacement for paper. does the same crowd complain about the lack of color in a typical paperback?

    furthermore, it’s not that they don’t deliver it, it’s that the technology DOESN’T exist (or isn’t ready for prime time yet). see the infographic above? they guesstimate that color will available in 2011.

    one of the biggest problems is that people don’t realize that eink is a totally different technology than LED/LCD. one of the key differences is that e-ink is bistatic – it “remembers” the image on the screen and uses little to no electricity to keep the image on screen, it only draws power when you’re changing the image (flipping pages). each cell (pixel?) on the screen has pigments that rise to the top when a charge is applied and it keeps them there – until another charge is applied (pulling the pigment back down so it can’t be seen).

  4. Stacey,
    an interesting article. Thanks.
    Just to point out a factual error:
    “Plastic Logic last week showed off its own e-reader built using different technology”
    Plastic Logic actually uses e-ink technology for the display. They use a different technology for making the transistors that go behind the actual display. That new technology enables flexible screens.
    So Plastic Logic is dependent on e-ink technology.
    This however underscores your concerns that in spite of being a monopoly in e-reader display technology, e-ink still sold for a very small amount.

  5. Ian Kemmish

    Well, it’s several years since E-Ink’s technology made its debut, and all they’ve done is increase the display size, and not really by very much. There haven’t been any striking improvements in the technology as far as I’m aware. If competing technologies are now starting to appear, the race is about to start; it would be a good time for the founders to exit if they don’t feel comfortable about their continuing ability to innovate. And since we’re not in a bubble any more, a technology firm might be expected, for once, to sell for about the same price as any other, in which case the earnings multiple seems reasonable.

  6. Mainly because it isn’t a market (right now, or maybe ever) that will generate big profits. Most stuff you can get for e-book readers for free or very little; people barely want to buy real books anymore.