E Ink's Q2 sales and gross margin decline, net loss increases

The Taipei Times reports that E Ink, the supplier of the electrophoretic displays used in most black & white eReaders, released its second quarter financial results yesterday. Revenues were approximately $149.5 million, down 35.37% from $231.3 million a year earlier. Gross margins were 0.6% vs. 32.5% a year ago. The company posted a net loss of $27.3 million vs. $26.3 million a year ago.

The fact that gross margins have collapsed (they were 1.1% in Q1) suggests that eReader manufacturers are putting tremendous pressure on E Ink to lower the price of its displays, and E Ink can't drive its manufacturing costs down fast enough to compensate. The Taipei Times report doesn't indicate how many eReader displays E Ink shipped, so it's difficult to figure out how to read the decline in revenue--but it's likely a combination of lower sale prices and lower demand.

Surveys in the U.S. suggest that the market for eReaders has peaked, and that color tablets will likely take the majority of the market in units over the next 12 months. (They already represent more revenues than eReaders.) There's still probably several years of life in the worldwide black & white eReader market. However, according to the article, E Ink will focus on other, more profitable applications for its displays, such as shelf price displays for supermarkets and convenience stores.