E Ink Reports 46% Sales Drop, Expects E-Reader Shipments To Be Flat This Year

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E-readers, such as the Kindle and the Sony Reader, were a novelty five years ago. But they are already on their way out. Display manufacturer E Ink Holdings reported its quarterly earnings and sales are down 46 percent year over year with a net loss of $33.6 million. It isn’t the first net loss, but it is the biggest one in four years. More importantly, the company announced on its conference call that it expects e-reader sales to range between 10 and 15 million for 2013 — flat compared with last year.

Overall, e-paper displays represent 70 percent of E Ink’s revenue. The vast majority of those displays go into e-readers. It has the advantage of consuming very little power and being easy on the eyes. Yet, it’s slow to refresh and black and white, making it exclusively useful for e-readers, smartwatches and other edge cases.

One of the reasons behind this quarter’s downturn is attributed to the fact that ereader companies are now updating their products during the third quarter, one quarter later. In other words, it suffers from seasonality. It’s not entirely true as the Kindle e-readers were updated during Amazon’s September event. Amazon still leads when it comes to market share.

E Ink is confident that sales will be much better as we get closer to the holidays, but still wants to diversify its offering to rely less on ereader sales. At the same time, the company relies on international growth in Asia and Russia to boost its display sales.

But the future of e-readers looks gloomy. Sales in North America and Europe are probably not as good as E Ink expected. E-readers were great devices when there wasn’t any cheap 7-inch tablet. But now, people can buy a Kindle Fire for $159 or a Nexus 7 for $269. The reading experience is worse on a tablet, but carrying multiple devices represents a cognitive burden. Moreover, e-readers were always a niche product. Market saturation of this small segment could come sooner than anticipated.