As the top maker of electronic guides for listing television programs, inventor of the VCR Plus system for recording TV shows and the soon-to-be owner of TV Guide magazine, Gemstar International Group wouldn't be an obvious candidate to promote a pastime that competes with television viewing.
But last week, the Pasadena company jumped into the electronic book business by announcing that it had bought NuvoMedia and SoftBook Press, two Bay Area companies that are pioneers in the still-nascent electronic book industry.
In 1998, NuvoMedia introduced its Rocket EBook, a hand-held consumer device that can store as many as 55,000 pages of text and graphics. The SoftBook Reader, introduced the same year, can store as many as 85,000 pages of text and is mostly used in corporate and government offices so that workers can access reports electronically.
The SoftBook Reader, which weighs 2.9 pounds and costs $599, and the Rocket EBook, which weighs 1.3 pounds and costs $199, account for nearly all electronic book sales, analysts said. The companies don't share sales information, but analysts say the number of units sold is in the thousands and represents less than 1% of the overall book market.
While futurists believe electronic books will be widespread in about a decade, the devices have yet to catch on with consumers. For many analysts, that only adds to the mystery of why Gemstar, with $166 million in annual sales and in the midst of an $8-billion buyout of TV Guide, would bother to acquire NuvoMedia and SoftBook Press.
"I'm trying to find the synergy, but I don't understand it," said Brian Phillips, a mobile computing analyst with ARS Inc., a La Jolla-based market research firm.
Analysts are also questioning the rationale of Gemstar buying two companies.
"It would probably be cheaper for Gemstar to just start their own e-book division from scratch," said Rob Enderle, vice president of desktop and mobile technology for Giga Information Group in Santa Clara.
But Gemstar bought the two companies with its rich stock, which has soared from about $5 three years ago (on a split-adjusted basis) to $79.88 as of Friday. Gemstar didn't say exactly how many shares it traded for the companies, but the total represented less than 3% of its fully diluted shares. That puts the deal's value below $575 million.
Henry Yuen, who launched Gemstar after a frustrating attempt to record a baseball game on his VCR, insists that e-books fits right in with his company's strategy.
"Gemstar's goal has always been to make technology consumer-friendly," said Yuen, the company's chairman and chief executive.
But there are questions about the need to make books more user-friendly.
"Usability is not a problem," Enderle said. "Most folks can figure out how to read them. That's not a problem that needed to be fixed."
The big problem is a shortage of popular books that can draw a big market for e-book readers. Fewer than 4,000 books are currently available for the two models now offered, said Tom Morrow, a spokesman for SoftBook Press in Menlo Park. Earlier this month, Microsoft, Barnes & Noble and Barnesandnoble.com announced an initiative to make thousands of books available electronically, though it's not clear how much they will overlap with the current library of e-books.
"[Book] publishers will be reticent to put out the content that's needed to establish the market, and at the same time consumers are reticent to spend money on a hardware device unless the content is available," said Marcus Colombano, director of marketing for Mountain View-based NuvoMedia.
Gemstar's deep pockets and relationships with consumer electronics manufacturers such as Sony, Philips, Thomson and Matsushita will help e-books break out of that circle, he said.
Morrow said the real synergy in the deal is Gemstar's "demonstrated ability to proliferate technology through licensing."
Gemstar creates products such as VCR Plus and on-screen interactive program guides and then licenses the technology to manufacturers who actually build it into TVs, VCRs and set-top boxes. Morrow figures the same thing could be done with SoftBook Readers and Rocket EBooks, which up until now have been manufactured exclusively by SoftBook and NuvoMedia.
A handful of other companies, including Microsoft, plan to enter the business later this year. (The other companies include Glassbook, Librius and Everybook.)
"We expect all kinds of sizes and shapes of e-books in the future, including yellow waterproof books that you take to the beach," Morrow said. "We don't need to build all of them."
Times staff writer Stanley A. Holmes contributed to this story. Karen Kaplan can be reached at firstname.lastname@example.org.