Microsoft just bought a floundering Israeli digital pen company, N-trig, for $200 million. Do they know something we don’t?
Just six months after Israeli company N-trig successfully lured Microsoft as a client, the global giant will gobble up the smaller company outright, acquiring it for a reported $200 million, according to Calcalist (in Hebrew).
N-trig creates both touch screens and digital pens to go with them. Despite having top-of-the-line technology and signing big-name clients like Microsoft, Acer, Dell, Toshiba, HP, Sony, Lenovo and HTC, the company has always struggled to turn a profit.
Founded in 1999 by Dr. Meir Morag, the company has raised $160 million in ten rounds of financing. But with only $12 million in equity and $5 million in cash, the buyout will not result in significant profits for investors. In 2014, the company tried to issue an IPO at a valuation that was lower than the amount it had raised from investors and received a “going concern warning.” In October, the company cancelled its IPO.
But in August, Microsoft switched its pen technology provider from Japan’s Wacom (which has 80 percent of the market) to N-trig. Microsoft also had acquired a stake in the company and reportedly accounted for 79 percent of its revenue. N-trig’s stylus is sold with Microsoft’s Surface Pro 3 tablet.
N-trig has about 180 employees, most of whom work in R&D and will reportedly become employees of Microsoft. Microsoft is said to be creating a new R&D Center that will focus on touch screens and styluses.
Geektime reached out for comment, but N-trig’s representative said they were not speaking to the press about the acquisition at this time.
Why would Microsoft buy a floundering company?
One could reasonably posit that since Microsoft has already bought a stake in N-Trig, they bought the company to save it from bankruptcy and stem their own losses.
However, a recent interview given by Panos Panay, chief of Microsoft’s Surface hardware group to Wall Street Journal, reveals a more strategic reason.
“We are also doubling down on the [pen] technology to bring ink to life. It is an opportunity for people to create in different, natural ways. You are going to see more and more people picking up that pen and using it,” he said.
In the age of the Palm Pilot, styluses were very popular, but when Steve Jobs introduced the first iPhone in 2007, he famously said, “who wants a stylus?” Touch screens were much more user-friendly and styluses went out of fashion.
But that was eight years ago. Since then, the folks at N-trig have been hard at work. They have solved many of the problems that made styluses cumbersome.
These pens are able to adjust to differences in penmanship and pressure and the screen can tell when you’ve inadvertently let your palm rest on the screen.
The transcription process has improved too. The accuracy is much better, with little latency.
“We have a lot of technology right now, not only in our labs but also in future generations of development in products, that start bringing that pen to life more and more,” Panay told the Wall Street Journal. “Getting the pen perfect on the Surface has got a little bit of a ways to go. And we will get there.”
Rumor has it that Apple’s next Tablet will include a stylus as well. And if that happens, we may enter a new era, one where we find that the stylus is back in style, and the pen is mightier than the word processor.
Who wants a stylus? Apparently Microsoft does.
Featured Image Credit: N-trig