Shrugging off iPad, maker of e-reader screens expands in Cambridge

A Kindle e-reader rests near a diner in a Cambridge restaurant in November 2007. Screens for almost all e-readers are made by the Cambridge company e-Ink. (Photo: Nat Tarbox)

It’s true Apple has sold about 3 million iPads in three months, and that makers of devices that read e-books are dropping out of competition, some declaring bankruptcy and others just reporting a “delay” in bringing products to market.

As the provider of 99 percent of the screens used by those e-readers, Cambridge-based e-Ink might have cause to be worried. But there are no obvious signs of worry at its Fresh Pond headquarters.

Instead, the company just finished laying the carpet at 735 Concord Ave., where it’s expanding from 733 Concord Ave. “We’re pretty much overflowing,” said Sriram K. Peruvemba, vice president of marketing for the company.

In three or four weeks, furniture will be in place and employees can move in, he said, which is good news considering e-Ink has ads posted for 30 to 40 new employees.

“There are still 50 models of e-books by about 20 different companies, and most are still shipping their products,” Peruvemba said, noting that some devices are sold in international markets essentially invisible to most in the United States. “Historically we’ve always had a majority share in the e-reader market, and that position continues.”

The company is also heading into the third quarter, which has typically been its busiest. It takes three or four months to get from making a screen to having a Kindle or Nook — among the most popular e-readers — onto store shelves or available for shipping from Amazon or Barnes & Noble, respectively. (In another shaky sign for e-readers, prices for the Kindle and Nook have been slashed to less than half the cost of an iPad tablet computer, boosting sales but cutting profits. Peruvemba said the price cuts have helped e-Ink.)

Bob O’Donnell, an analyst for the technology research firm IDC, agreed in part with e-Ink’s optimism. He doesn’t see the market for e-readers peaking until 2012, and even then a decline will be modest.

The iPad tablet computer goes on sale in April at the CambridgeSide Galleria’s Apple Store. The iPad is considered a threat to the e-reader market. (Photo: Ben Saren)

He also doesn’t want to exaggerate the effect of the iPad, which does many things besides serving as an e-reader. “Let’s be clear,” he said Tuesday by telephone from California. “The iPad has not killed the e-reader market, despite some initial misgivings. Has it impacted it, of course it has, but the exact impact is hard to tell.”

Peruvemba believes readers of books will stick long term with e-readers and e-Ink’s low-power, high-quality technology, and O’Donnell agrees the iPad is too heavy and that “electronic paper” is preferable to the iPad’s bright, crisp — and useless in sunlight — screen for books or reading of large documents. “It’s less demanding on the eyes. Thinking about reading on the iPad … you’re basically staring into a lamp! And it’s going to impact your eyes in a way an e-Ink screen will not,” O’Donnell said. “If I read magazines, of course the iPad is the better choice.”

While the iPad is, for all intents and purposes, the only tablet computer out there, it won’t be for long; there will be at least one using Google’s Android operating system next year, and most likely others, O’Donnell said. (And possibly even a smaller iPad.) Sales of tablets are expected to soar, and not to peak until, at the soonest, 2014. IDC forecasts go only five years out.

O’Donnell’s new, unpublished figures predict sales of 12 million tablets this year, doubling next year, while e-readers may sell 6.5 million this year, 8.2 million or 8.3 million next year and peak the year after that at 9.2 million.

Improvements aren’t lifting stock

Technology for e-readers is improving, with e-Ink already rolling out the Pearl display, which gives e-readers higher contrast and looks more like paper, and on schedule to provide color devices to device manufacturers this year, Peruvemba said. His company’s screens are already flexible, but e-readers put plastic frames and touch-sensitive glass around them. Now they’re nearing the point of releasing flexible-screen e-readers to match growing demand. Other e-Ink products, such as watches, already take advantage of the flexible screens.

O’Donnell is skeptical of e-Ink color, though, having been to Taiwan to see the prototypes.

“You know what, they’re not ready,” O’Donnell said.

And none of this — and not even the news from Amazon that last month e-book sales outpaced that of hardcover books — seems to be helping the stock of e-Ink’s Taiwanese parent company, e-Ink Holdings Inc., known until June 18 as Prime View International: At the end of business Wednesday, shares were at $47.45, down 44 percent from a Dec. 30 peak of $84.30. A stock chart from the high is essentially a long, jagged downhill slide, and it begins immediately after holiday sales and shortly before the year’s Consumer Electronics Show, which was dominated by talk of a device that wouldn’t be unveiled until weeks later: the iPad.

The company, which also sells Hydis LCD products, doesn’t separate e-Ink from the rest of its business, Peruvemba noted.

“The iPad was great for the e-reader industry. It educated those sections of the market we historically have not been able to reach. From an e-Ink perspective, we’ve been educating the market for the past 12 to 13 years, and then in the recent past — three or four years — we have also had our customers like Amazon, Sony and others spending advertising dollars to educate the market,” Peruvemba said. “Now we have Apple joining the fray, and obviously they have a good reach into the market and they are able to educate some of those portions of the market that previously had not been [accustomed to] to the concept of reading books digitally.”

“The vast majority still believe that the e-Ink displays are the best digital reading experience,” he said. “We’ve seen the entire market grow for e-readers.”

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