According to analysts, the popularity of tablet PCs will have a negative effect on the e-book-reader industry. The market growth for e-book readers in China this year will be 1.05 million units, below previous estimates, while sales of tablet PCs will reach at least 4.5 million units. [Photo/Agencies]

Hanvon's sales and share price have slumped since its listing last year

BEIJING - Having boasted in May 2010 that its aim was to overturn Apple Inc's dominance in the Chinese tablet PC market, the nation's leading maker of e-readers and tablet PCs, Hanvon Technology Co Ltd, has posted a first quarter loss of 40 million yuan ($6 million).

By contrast, the company it planned to overtake, Apple, registered a profit of $6 million for the same period.

At the time of its claim, Hanvon seemed to be on top of the world. In 2009, full-year sales revenue from its e-readers increased to 580 million yuan, from 200 million yuan in 2008.

Following the release of the results, Liu Yingjian, Hanvon's founder and chairman, admitted that the loss was the result of the appearance of more tablet PCs in the Chinese market.

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Only 280,000 e-book readers overall were sold in the first quarter of this year, a decline of 7.41 percent quarter-on-quarter, while tablet PC sales reached 1.04 million units, a 32.5 percent quarterly increase, according to the Beijing-based research company Zero2IPO Group,.

At its peak in 2009, Hanvon held 80 percent of the e-book market.

The company listed on the Shenzhen Stock Exchange in March 2010. Its share price skyrocketed to 175 yuan just a few days after its IPO, but had fallen to 23.90 yuan at the market close in Shenzhen on May 5.

The market growth for e-book readers in China this year will be 1.05 million units, below previous estimates, according to data from the IT research company, Analysys International.

Meanwhile, despite arriving on the market later than e-book readers, sales of tablet PCs will reach at least 4.5 million units.

This year, a number of international companies will launch new tablet PCs in China, including Hewlett-Packard Corp, Dell Inc, Acer Inc and ASUSTeK Computer Inc.

Apple's iPad 2 goes on sale in China on May 6, in tandem with a price reduction for its earlier first-generation iPad. "Last year, our N800 e-book reader cost 3,400 yuan - 500 yuan less than an iPad," said Hanvon's Liu. "However, we were forced to cut the price of the N800 to 2,900 yuan in response to the price reduction of the iPad 1."

Amazon.com Inc also lowered the price of its Kindle e-book reader to $114 in response to the iPad price cut, but without sustaining a loss, according to its financial report.

"Unlike the United States, Chinese e-book producers haven't formed a cohesive business chain that integrates devices, applications and e-book copyrights," said analyst Sun Peilin from Analysys International. "The profit margin from selling hardware has become increasingly narrow due to intense competition."

Chinese e-book producers need to cooperate with publishers to develop software for the device, because they won't survive by only providing hardware, said Sun.

Liu said Hanvon will place more emphasis on developing software, such as an e-book online sales platform, in the hope of rescuing its full-year sales revenue. Amazon.com has more than 810,000 e-books available through its website, while Hanvon has only about 100,000.

According to Zero2IPO, the popularity of tablet PCs will have a negative effect on the e-book-reader industry, but "the effect has been limited so far", said Zhang Yanan, an analyst at the research firm.