Plastic Logic has just landed $150 million in investments from a state fund in Russia to bring its ill-fated soft-screened e-reader to the nation’s schools. If an initial experiment is successful, it could be followed by up to $550 million more in financial incentives–which isn’t bad for a device that was canceled a year ago.
The money is coming from Rusnano, the official venture investment arm of the Russian government, and it’ll see 1,000 of PL’s e-readers on test in the field. Rusnano demonstrated the device to prime minister Vladimir Putin (who was apparently delighted at the lack of a hard screen, noting it would be safe even if “students decide to fight with each other via computer”) and it’s most probably thanks to his approval that the hundreds of millions of dollars have begun to flow to Plastic Logic’s base in Cambridge, U.K.
Plastic Logic’s innovative devices, based on an unusual e-ink-on-plastic soft display tech instead of the more common glass substrate, hit a couple of years ago and received significant applause. We even pondered if they could turn into a Kindle-killer, and then were excited as PL evolved their design into the very promising Que e-reader, which was aimed squarely at the 21st Century business exec. For various reasons, including the arrival of the iPad and its subsequent explosive sales and adoption in enterprise, the Que was scrapped in 2010 and that seemed that for PL: It had innovated itself into a marketplace corner, then seen the market evaporate.
But the new money tells a different story. If the field trial proves successful, up to $700 million in total finances–some dedicated to a production facility in Russia–could be at play. Plastic Logic is said to be offering the devices for 12,000 rubles ($415), which equates to nearly half a million dollars in sales for an erstwhile “dead” product, and if the system goes nationwide this could quickly reach billion-dollar levels.
The company is not alone in pursuing large international sales. Turkey is investigating buying 15 million tablet PCs for its educational system as part of the FAITH Project (Movement for Enhancing Opportunities and Improving Technology) and is in the early part of the process–which so far has seen economy minister Zafer Caglayan touring Seattle and Silicon Valley and meeting with Apple and Microsoft. Microsoft seems to have gained favor, and may send teams to Turkey to help assess the project, but with 15 million unit sales on the table it’s highly likely both firms (and possibly others) will be aggressively pursuing the deal.
Looking at it from Apple’s point of view, we know that Apple’s entry-level iPad 2 with Wi-Fi–the most likely device for the deal–sells for $499 in the U.S., and though there’s no Turkish Apple Store, the same unit sells for as much as €479 in other European nations (Portugal, for example) which is an equivalent of around $680. According to expert estimates, the iPad 2’s bill of materials is around $326, which means even in the U.S. Apple could snip $100 off the price and still enjoy a reasonable profit on the hardware sale. Assuming it offered 15 million units to Turkey at $400 a piece–a big knock-down on the local equivalent price–that equates to an instant revenue of $6 billion. And we can probably assume this would lead to billions more in iTunes income over the years as all those schools bought apps, and fed Apple it’s usual 30% iTunes revenue cut.
The education market is tempting for tablet makers because their products really do offer advantages to schools and students, and with bulk purchases on offer there’s billions of dollars of income at play–in the kind of instant cash lump that companies like MS, Intel-Kno, Apple, and Plastic Logic would love to report as part of a quarterly finance call, along with the filip the educational purchases would give to overall unit sales (some fine PR material there). And then there’s the old adage of imprinting brand loyalty on younger people, in the hope they’ll favor it in the long term: Russian kids may favor e-readers, while Turkish kids get to decide if they’re Macs or PCs.