Israeli firm will boost Microsoft's goal of making writing with a stylus on mobile devices as natural as writing on paper
Microsoft Corp. (MSFT) has reportedly taken a bold step in building its in-house Surface hardware team, buying the Surface 3 Pro's stylus maker, N-Trig, for approximately $200M USD.
The input startup was founded in 1999 and is based in Kfar Saba, Israel. To date the company had held 10 venture capital rounds and raised $160M USD in seed money from investors, according to CrunchBase. Microsoft was among these early VC backers, owning 6.1 percent of the company already, according to CrunchBase.
In recent years N-Trig has struggled to meet its investor expectations in terms of sales produced revenue in the tens of millions of dollars. According to Reuters, the company made $26.6M USD in revenue in 2012 and $36.7M USD in 2013 (up 38 percent on a year-on-year (YoY) basis).
On the flip side, its hardware has reached millions of users worldwide in recent years. Its styluses and the screen technology that support them have been incorporated into hardware and devices from Acer Inc. (TPE:2353), Dell Inc. (private), Fujitsu Ltd. (TYO:6702), Intel Corp. (INTC), Hewlett-Packard Comp. (HPQ), HTC Corp. (TPE:2498), the Lenovo Group Ltd. (HKG:0992), Microsoft, Sony Corp. (TYO:6758), and Toshiba Corp. (TYO:6502). The stylus technology has appeared in numerous smartphone, tablet, and ultrabook models.
N-Trig has been awarded over 100 patents on mobile stylus and supporting display technology. N-Trig's largest competitor in the stylus space is arguably Japanese handwriting and pen stroke recognition giant Wacom Comp., Ltd. (TYO:6727).
The acquisition was first reported [translated] last night by Israeli financial news site Calcalist. According to that report Microsoft will incorporate the company into its Microsoft Israel subsidiary and will open a new research and product development center in Kfar Saba or a nearby town in order to ensure minimal disruption to the company's 190-person staff.
N-Trig's CEO Dan Inbar is pictured in the inset, over his company's stylus product w/ a Surface 3 Pro.
[Image Source Calcalist]
The acquisition follows the January pickup of another Israeli firm, Equivio. Equivio was acquired for $50-100M USD, according to Calcalist. The two firms are only vaguely related; Equivio's product focuses on text analytics. Its product allows companies to analyze Microsoft Office documents and organize them in automated fashion in order to fulfill legal compliance requirements in various regions.
The N-Trig acquistion appears aimed at new Microsoft CEO Satya Nadella's vision of making writing with a stylus on a tablet, smartphone, or laptop screen as natural as writing on paper. In a recent interview with ABC News the CEO said that "fountain pens" are one technology that will disappear in coming decades.
In a recent interview with The Wall Street Journal (WSJ), Microsoft's Surface product manager Panos Panay said the stylus was a vital selling point for the device and that Microsoft's remote metrics indicate it's used on a regular basis. He commented:
We have seen a massive increase in [daily] usage, especially with the seamless integration with OneNote. And there will be more integration with the software moving forward with Windows 10.
The Microsoft tablet got an unpleasant snub from some CNN anchors who used it for a kickstand for Apple, Inc.'s (AAPL) iPad, despite being paid to promote the device. On the flip side it got a warmer welcome from pilots in Austria, who supported picking it over the iPad, calling it "a dream come true."
Microsoft's Surface tablet business is starting to finally hit its stride. After posting revenue of ~$900M USD in calendar Q3 2014 (Microsoft's Q1 FY2015), revenue cracked the billion dollar mark quarterly for the first time in Q4 2014 (Microsoft Q2 FY2015). Various Surface Pro 3 SKUs have MSRPs of between $799.99 and $1949.99 USD, so this suggests sales of around 1 million tablets for the quarter.
Sources: Calcalist, Reuters
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