Sharp May Sell Galapagos in Europe, China to Challenge Apple IPad, Kindle

Sharp Corp., which started selling its Galapagos e-reader in Japan this month and will market it in the U.S. in 2011, is targeting Europe and China next to challenge Apple Inc.’s iPad and Amazon.com Inc.’s Kindle.

“After the U.S., we’re looking at other regions where electronic-book reading is increasing,” Masami Ohbatake, an executive in charge of the company’s communications business, said yesterday in an interview. Sharp teamed up with Verizon Communications Inc. to sell the device in the U.S, he said.

Sony Corp. and Samsung Electronics Co. also aim to increase their share of the market for e-readers, devices that allow users to read e-books, magazines and newspapers, and can also play video and audio files. Worldwide shipments of electronic- reading devices may rise more than five-fold from last year to 26.5 million units by 2014, according to researcher ISuppli Corp. The figure excludes sales of tablet PCs such as the iPad.

“I don’t think the Galapagos will be successful,” said Atul Goyal, a senior analyst at CLSA Asia-Pacific Markets in Singapore, who has a “sell” rating on Sharp. “I wonder how this company will make money in this product category when they are one of the many crowded participants, without any competitive advantage, with an expensive price tag, and with no brand power.”

The Galapagos 10.8-inch model sells in Japan for 54,800 yen ($655), compared with the 16-gigabyte iPad at 48,800 yen.

Galapagos Syndrome

The name of Sharp’s e-reader derives from “Galapagos syndrome,” a term that refers to the idea that Japanese technology has evolved in an isolated setting that has little in common with the outside world, Ohbatake said.

“People might think the name is strange, but as a Japanese company we’re proud of our technological developments,” he said. “We wanted to show that Japanese technology is actually being used all over the world.”

Sharp, the maker of Aquos televisions, in 1988 developed the world’s first color thin film transistor liquid-crystal display, and in 2000 marketed the first camera-equipped mobile phone, according to its website. The Osaka-based company is also Japan’s biggest mobile phone maker.

‘Good Start’

Galapagos sales in Japan are “off to a good start,” Ohbatake said, declining to give specific figures. The palm- sized 5.5 inch model is outselling the 10.8 inch model by about 2-to-1, probably because it’s easier to use on trains, he said. The company targets sales of 1 million units by next year, and Ohbatake said the device’s software, called XMDF, may help Sharp compete in the electronic book market because it allows publishers to lower the cost of producing electronic titles.

Sharp is in talks with content providers in the U.S., Ohbatake said.

Ohbatake said the Galapagos, tailored to display vertically running Japanese script, can be easily adapted for overseas markets. Sharp is considering selling the device, marketed as a “media tablet” that combines e-reading functions and audio- visual playback, in Europe and China as early as next year, he said, without specifying when the decision will be made.

Sharp’s shares, down 27 percent this year, rose 1.7 percent to 853 yen as of the 3 p.m. close on the Tokyo Stock Exchange, compared with a 1.5 percent gain in the benchmark Nikkei 225 Stock Average. Apple’s shares have risen 53 percent this year, and Seattle-based Amazon’s stock is up 36 percent.

Sony this month introduced its Reader device, and Samsung Electronics is targeting sales of 1 million units for its Galaxy Tab by year-end after unveiling the product in September. Apple controlled 95 percent of the market for tablet computers in the three months ended September, according to researcher Strategy Analytics. The company sold about 7.46 million iPads between April and September, according to Bloomberg data.

To contact the reporter on this story: Adam Le in Osaka at ale14@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editor responsible for this story: Drew Gibson in Osaka at dgibson2@bloomberg.net.

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