The Sharp Pain in Apple's Side

By Rick Aristotle Munarriz | More Articles
July 21, 2010 | Comments (5)

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Come on in, Sharp. The water's fine -- if you fancy piranhas.

Sharp is entering the crowded e-book market, introducing an e-reader that it hopes to introduce in Japan later this year. It's already in talks with Verizon (NYSE: VZ ) for a stateside rollout shortly after that.

This, naturally, is a lousy time to break in an e-book reader. Amazon.com (Nasdaq: AMZN ) , Sony (NYSE: SNE ) , and Barnes & Noble (NYSE: BKS ) have all kicked in with aggressive price cuts in recent weeks, dropping the price of e-book gadgetry to as little as $149.

Sharp would also seem to be diminishing its chances by breaking in a new proprietary publishing format.

You're probably shaking your head like an oscillating fan on high speed, but there's a twist: Sharp's new reader doesn't look like any of the e-Ink gizmos on the market. It's actually more in the mold of Apple's (Nasdaq: AAPL ) iPad, available in two different sizes, but with the same touchscreen tablet form factor as Apple's device that sold 3.3 million units during the last three months.

Now taking on one Apple may be seen as even more fruitless than taking on three entrenched giants playing sticker price limbo, but Sharp has a plan to compensate for its unfashionably late arrival. Sharp's updated XMDF platform takes text and images one step further by incorporating embedded video and audio.

Pricing will be the key, here. It may be treated to a hometown hero reception in Japan, but if it's able to slip in at a price that is markedly lower than the iPad it may step in as a stateside tweener. Whether it's seen as a poor man's iPad or a rich man's e-reader, it will have to price itself ambitiously if it wants to differentiate itself -- favorably -- from the multifaceted iPad.

Is that where Verizon steps in? Can wireless data contracts subsidize the price tag, or are customers smart enough to work the math and turn away like they did with "free" netbooks? If successful, isn't Apple just as likely to strike a similar deal with AT&T (NYSE: T ) for its iPad -- instead of the current non-subsidized month-to-month deal, where the 3G model of the iPad is actually more expensive than that non-3G unit?

This battle is about to get even more interesting. Start taking notes, Amazon.

Does Sharp stand a chance in this crowded niche? Share your thoughts in the comments box below.

The Steve Jobs Betrayal
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Longtime Fool contributor Rick Munarriz has been a Kindle owner since 2008 and an iPad owner since April. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. He does not own shares in any of the companies in this story. The Fool has a disclosure policy.

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Report this Comment On July 21, 2010, at 11:08 AM, pberk wrote:

Duh... you've got to do a better job of keeping up with the tech...
The iBooks 1.1.1 update released on 7/19 enables you to view books with embedded audio and video...
Also your comment about ATT's plan for the iPad 3G model being more expensive is odd... you don't need a data plan for the wi-fi version if you are going to limit your connectivity to your own wi-fi network (which presumably you already pay for) or free hotspots (which is not a very secure activity... lots of hotspots labeled "free wifi" are known hacker traps set up to steal personal information.) But if you want an ATT wifi plan that will allow you to connect to ATT and partner hotspots outside of you personal networks, that will run you 19.99 per month... which is LESS than the basic wifi+3G plan which runs 14.99 per month....
Report this Comment On July 21, 2010, at 11:09 AM, pberk wrote:

Whoops, that should have read "MORE than the basic wifi+3G plan"
Report this Comment On July 21, 2010, at 11:36 AM, Henry3Dogg wrote:

Looks like an eReader to me.
That makes it a pain to the other readers.
People choose between an eReader or an iPad and if they decide eReader, then they choose which eReader.
One more eReader, or 50 more eReaders, will have little impact on the iPad or Apple.
Report this Comment On July 21, 2010, at 12:04 PM, silivalley wrote:

It depends on how one defines saturation.
eReader market is not saturated in terms of technology roadmap. The current generation of devices are just starting the process of making eBooks a viable choice for consumers.
It will be three to four more generations before eReader technologies discover standards espoused by users as well as publishers. That will then spur another round of innovations. Only then can we talk about saturation.
eReader market is not saturated in terms of adoption. Until every child, school, hospitals, or even the military rely on eReader as much as they rely on PC (regardless of OS), the market has significant growth potential and still needs significant amount of innovation.
As for Sharp's eReader, it is not competing against the iPad. iPad is not an eReader, it is a consumer connectivity device, the first generation of its type. Soon, other companies will catch on and begin shipping their own variations. While many will still buy cheaper netbooks to surf, use email, consume online multimedia material, others will forego netbook for dedicated and easier to use devices like iPad.
As of right now, Sharp is marching to its own tune. If I were an investor, I would pay more attention to who is coming out with a tablet that will match the iPad. I would not pay much attention to Sharp's offering; especially when it uses its own proprietary format.
Report this Comment On July 21, 2010, at 12:13 PM, silivalley wrote:

It is very common for us to use the word "saturation". This can really skew the investment strategy of an technology investor if he or she is ill-informed.
When iPhone came out, many pundits roared that the market is "saturated" and "crowded". Self-proclaimed "cutting-edge" coder writing articles for well-known websites even laughingly assume programming language compilers are done. Then there are those who proclaim that "Cloud Computing" will be the death of desktop.
None of these pundits really know anything about the reality of software engineering and how far we have came and how much farther we have to go. For traders, understanding these details are unnecessary. You do your trade, make your cash and you move on.
For investors who truly want to invest in interesting technologies, learning and thinking about these technological details are critical. If you have 200K or more invested, it may even pay to take high tech classes and get a feel for where we are, where we are likely to go and what is useful and what is fluff. When you are investing your hard earned cash, there is nothing like getting as much first-hand knowledge as possible.
eReaders are definitely not even close to saturation both physically (sales, adoptions and usage) and intellectually (technologies, innovative applications).

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