Several years ago, the US administration launched an initiative aimed at providing every child with a computer. This initiative developed over time, and became a focal point for companies supplying exceptionally cheap computers for basic use. The most active person in this field was MIT Media Laboratory founder Professor Nicholas Negroponte, who conceived the “$100 Computer” project.
Unsurprisingly, a number of Israeli companies are also competing for this potentially huge market. One of them, Rosh Ha’ayin-based Fourier Systems Inc., will try next year to take a substantial share of the US market for PCs for kids. This market is believed to be worth $25 billion, and to grab a share of it, Fourier has carried out a number of business and technological changes in recent years.
Fourier is not a new company, and it would be difficult to define it as high-tech company in the accepted sense of the word. It was founded in 1989 as a developer of data logging services for industrial applications, and subsequently expanded its range of data logging applications to the science education market. The device that Fourier developed back then is connected to sensors and gathers environmental information such as temperature, light, humidity, and pressure levels. The data is used by the food and pharmaceutical industries, the transport sector, and others. Fourier’s applications for the education market are designed for use by research laboratories, where they collect data and analyze trends using the company’s software.
Fourier developed all of this years ago. During the last two years, it has focused on entering the computer for every child market. “The Americans decided to go for a solution to provide a computer for every child, and so far, they have had two options to choose from: a laptop or a PDA,” explains CEO Dov Bruker. “The laptop is limited in terms of price and size, and it also takes time to boot up. The PDA is not convenient for users, and it does not have suitable interfaces for external communications. Our product supports web applications, MS Office, as well as science and math software. As we use a real-time processor, programs load up immediately, as they do on hand-held computers. It currently costs $399, which is low compared with the alternatives. We have produced a computer with the functions of a laptop for the price of a PDA.”
The product Bruker refers to is the Nova 5000 series, the company’s hope for capturing the hearts (and pockets) of school pupils (and of the education system) in the US. The Nova is a tablet PC based on Intel’s PXA 255 400 Mhz processor, which is designed for installation in embedded systems, and is used primarily for cellular devices. Fourier’s tablet PC supports connectivity through a 10/100 ethernet port, 2 USB 1.1 ports, microphone and external keyboard ports, and, naturally, a12-bit/8 input sensor interface.
The machine uses the Windows CE.NET 5.0 operating system, which Fourier adapted to support special formatting, enabling extensive use of MS Office software. The company says it collaborated on the development of its device with science software developers such as MathResources Inc., developers of Portrait4 math software, and with search companies such as Thinkronize Inc., developer of the education resource search engine Net Trekker.
A study of Fourier’s business plan reveals some extremely impressive figures on business opportunities that will become available in the US education market in years to come. According to these, the US education system is likely to undergo a rapid digitization process over the next five years. The legislation providing computers for all children will come into effect on a wide scale starting from next year, with the number of pupils with computers rising to five million, reaching 10 million by 2009, and 55 million by 2021.
The background to all this is a Federal law entitled the “No Child Left Behind Act” (NCLB) of 2002. The law, which aims to develop an egalitarian education system and improve results, puts certain obstacles in place. One of them is a series of exams to test school standards in math, literacy, and sciences. The exams will be introduced in 2007-2008, and naturally, the Americans will impose some unpleasant sanctions on any school that doesn’t meet the standards required.
The US administration conducted assessments back in 2003, which revealed that, without encouragement to switch to computer-aided learning, at 70% of schools would fail these tests. This led to the launch to the 1:1 initiative - computer for every child initiative. The US has 16,000 regional schools which are attended by 54 million pupils from nursery through twelfth grade (known as K-12). Only 3.8% of schools began implementing the 1:1 program in 2006.
The business trigger for this massive market stems from the exams in science subjects that will be introduced by the US Department of Education staring from next year. “A number of states and large regional schools are considering the procurement of computers under the auspices of the program as early as this year,” says Bruker.
He adds, “Our plan for 2007 is to reach a market of 1-2 million pupils at a price per unit of $300. Additionally, we can create a community of users, whom we can provide with future educational and cultural content and, of course, there is the sensor market, which we can leverage through the introduction of our computers.” Fourier plans to enter the US market using the distribution platforms of computer manufacturers such as Dell Inc. (Nasdaq: DELL), Ingram Micro Inc. (NYSE: IM), and CDW Corporation (Nasdaq: CDWC).
“I think we have an excellent chance,” says Bruker. “We’re talking about sales of hundreds of thousands of units per year. However, we want to narrow the time window so that we can enter the market in time, and to achieve this we need to raise around $3-10 million so that we can build up a sufficiently large inventory.” Fourier estimates revenue for 2008 at $150 million ($120 million of which will be generated by sales of Nova), if they meet their own market penetration projections. “We would prefer to bring in a strategic partner, perhaps from the publishing sector,” says Bruker.
In the meantime, while waiting for the optimistic forecasts materialize, Fourier ended 2005 with sales of $5.2 million and posted a profit. The company expects sales to reach $8 million in 2006, but does not believe it will post a profit this year, due to the major investment it made. Fourier invests 25% of turnover in R&D. It has two registered patents and is applying for a third. 90% of its sales are to overseas customers.
Globes: You are planning phenomenal growth, but where do the big computer manufacturers come in? Are they really going to leave you with this bonanza to yourselves?
Bruker:”There are several of competitors on the market. One such rival is Data Evolution Corporation’s Cathena notebook, which also runs on Windows CE and looks like a laptop, but costs $800. Then there is Professor Negroponte’s $100 computer initiative, which now looks a long way from fruition in the US, and therefore it’s difficult to see how it will remain afloat at that price. In addition, Intel Corporation (Nasdaq: INTC) has also entered this market with Eduwise, which is a computer priced at $400 but which is designed primarily to head off a challenge by the rival AMD processors which have been used in the $100 computer project.” Fourier also notes the large laptop manufacturers, such as Hewlett Packard (NYSE: HPQ), and Lenovo, albeit at much higher prices.
Fourier also sees other opportunities in the US education market in addition to the computer for every child scheme, which amounts to a $25 billion market over the coming years. They talk about markets for educational computer applications. These are the laboratory sensor data collection market, estimated at $700 million; the e-book market, in which leading publishing houses (such as Pearson Education, McGraw-Hill, Thomson Corporation and others) are also active, estimated at $15 billion; and the web-based exams market, estimated at $10 billion.
Published by Globes [online], Israel business news - www.globes.co.il - on August 17, 2006
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