E Ink in 2005
Things were looking up for Russ Wilcox, the 37-year-old CEO of E Ink. After years of laboring with products in the lab and numerous false starts, E Ink was shipping real products for Sony’s first eBook. For a start-up with a leading-edge technology, this was a major accomplishment. E Ink had started in 1997 as a spin-off from MIT’s Media Lab. Since its inception, management had raised over $120 million with the mission to deliver a new electronic display that would have all of the advantages of paper (reflective, high contrast, and flexible) with all the advantages of an ideal electronic device (very low power, updatable, and capable of color and video). E Ink not only demonstrated a commercial version of this product, it had also built an extensive supply chain and network of high-profile partnerships including a manufacturing agreement with a $10 billion Japanese firm, Toppan Printing. Due to a recent round of investment from Intel Capital, the company was solvent through October 2005. Wilcox, however, was still grappling with the issues of business model and focus. As a new technology, E Ink could alternately become a licensing company, a materials supplier (supplying a layer of electronic ink sold as an imaging film ready for integration into a display), a subassembly supplier (offering display modules, including an electronic backplane and driver electronics), or even a product supplier (offering eBooks or similar products that uniquely leveraged E Ink technology). The company had flirted with all of these approaches over the course of its history and most recently had focused on selling electronic ink as a display component. Whether this was the right answer remained the ongoing topic of hot debates among the members of the management team. The other big question was market focus. On one hand, the biggest potential market continued to be matrix displays: conservatively, Wilcox estimated that E Ink’s total available revenues in the graphical display segment could reach $300 million. E Ink’s technology appeared to be far ahead of that of its nearest competitors, and Wilcox felt that they might capture up to 80% market share in niches related to electronic publishing. Moreover, E Ink could probably earn better than 50% margins. However, the time frame for consumer acceptance of eBooks, e-dictionaries, and related products was unclear. No previous eBook device had yet exceeded 50,000 units sold. Moreover, finding great content for eBooks was problematic. On the other hand, E Ink could also try to apply its technology to the “segmented” display business for products such as signage in retail stores and displays for watches and clocks. Wilcox estimated that the segmented display market could be worth about $100 million in revenues. Yet unlike selling into eBooks, which were an emerging category, selling into the relatively mature signage business meant many competitors, substitute products, and, at best, a market share of 2% to 3%. Still, if E Ink could generate even modest revenues with segmented displays, it might shorten the time required to reach positive cash flow. As with many new technology companies, E Ink was facing a chicken-and-egg problem. How could they balance the resources required in the short term to generate revenues with those needed to produce a long-term home run? ________________________________________________________________________________________________________________ Professor David B. Yoffie and Research Associate Barbara J. Mack prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2005 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu....
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