Wednesday, January 12, 2005

What Can This Pen Do For You and Your Field?

New Computer Pen Reads Handwriting And Can Talk Back

January 12, 2005; Page B1

In a consumer electronics market flooded with iPods and Xboxes, LeapFrog Enterprises Inc. is making a play for 8-to-13-year-olds with a talking digital pen that answers math problems, corrects spelling and plays fantasy baseball games.

The product, called FLY, is a "pentop computer" from LeapFrog and Swedish technology firm Anoto AB. The $99 gadget is essentially a pen with computer electronics that captures text in a digital file as the user writes on special paper covered with barely visible gray dots. As bulky as a thick magic marker, FLY uses a small camera hidden under the tip that records writing at about 75 frames per second. The pen's software can "read" a user's handwriting or drawing and then orally respond.

For example, a student can draw a "calculator" pad on the paper, touch the pen to the numbers of an equation and hear the answer through the pen's speaker. Writing out an equation, say, "2+2," generates the same result. The pen will answer "4." It can give hints on how to do long division, spell words or quiz students with interactive worksheets. Handwritten English words can be translated through the pen's speakers into Spanish or French.

The pen can also be used musically: a rectangle drawn into eight slices becomes a keyboard's eight notes so the writer hears different notes when touching each slice. Similarly, a set of drawn circles turn into a drum kit, with different percussion sounds generated by touching the circles with the pen. Users can compose music using different beats and sounds, which can then be downloaded as a cellphone ringtone.

The $99 FLY computer pen.

Basic computer functions such as an alarm clock and calendar are available. The calendar would note that soccer practice starts at 4 p.m. on Mondays. At that date, the pen reminds the user of the practice.

LeapFrog plans to begin selling the pen in the fall, and it's already thinking about some possible complications. If a user writes an obscenity, for example, the pen may respond with an oral message like, "You can't say that." And while illegible handwriting is another possible problem, LeapFrog thinks that by age 8, most kids' penmanship will be good enough to be recognized by the computer.

Since the pen isn't yet on the market, some unexpected glitches could crop up. The pen holds a lexicon of about 70,000 words, but if a user writes a word that isn't covered by the program, the pen will say it doesn't recognize the entry and advise the user to try again. FLY has limitations: its calculator cannot do fractions, for instance.

While LeapFrog and others have made technology-driven products for young children, there is very little available for kids as they head into their teens. Jim Marggraff, an executive vice president at LeapFrog and developer of FLY, believes the pen's ability to deliver high-tech computer capability in the low-tech format of pen and paper is not only learning-friendly, but also the start of a "new medium of technology."

Leapfrog has tried to give the pen features that will make it cool for tweens. Products for girls include an interactive diary that asks users questions to stimulate journaling. Boys can play an interactive fantasy baseball game that uses Upper Deck baseball cards and comes with sound effects like the crack of a bat and an announcer's voice.

Mr. Marggraff began thinking about FLY in 2000, when he saw a story about Anoto in Wired magazine. At that time, Anoto's technology was being used as a business-to-business tool in the legal and health-care industries. Anoto developed a special pen that, when used with the dot paper, would download writing into a computer. When used in a doctor's office, for example, a form filled out with the special pen and paper would be stored in the office's computer system.

Adding LeapPad's audio technology would create a new type of computer product, Mr. Marggraff thought -- one that could do "everything a Leap can do without the LeapPad," he says.

Although versions of pen computers have been around for about a decade, analysts say FLY is the first such device aimed at kids for educational purposes and therefore might be a hard sell to teachers and parents. "Overall the educational market is slow to adapt technology," says Tim Bajarin, president of technology research firm Creative Strategies Inc. who has used FLY. "Parents sometimes have an aversion to using technology even for educational things, especially parents from an older generation."

The toughest group to convince may be the target audience themselves. Although still popular with the 3-to-8-year-old set, LeapFrog products for older students haven't fared as well, says Harris Nesbitt analyst Sean McGowan, who has not seen the pen. LeapFrog's brand recognition could hurt more than it helps in marketing to this age group, he says, as most of them "aren't going to be caught dead with a LeapFrog product."

When LeapFrog released LeapPad in 1999, its mix of sophisticated computer-chip capability and educational content invigorated the sleepy electronic learning-aid category, turning the company into an industry leader with more than 75% of the market for preschoolers. But in the year-to-date to November, industry-wide sales of electronic learning products were about $650 million, basically flat from the 2003 period, according to NPD Group, a Port Washington, N.Y., market-research firm.

LeapFrog took a hit in December when it retracted its estimates for 2004 earnings, citing a slowdown in reorders and issues with inventory. In the third quarter, LeapFrog had net income of $20.2 million, down 39% from $33.4 million in the year-earlier period.

The FLY launch, starting with an event today in New York, will be a big gamble for LeapFrog, which has put a chunk of its $56 million research-and-development budget into a four-year effort that pulled together more than 300 engineers, designers and consultants. The pen is part of LeapFrog's push to expand into the consumer electronics space and reach beyond its traditional customer base of young children who use its LeapPad interactive books.

The company also has formed a network of developers, including companies such as Hewlett-Packard Co., Walt Disney Co.'s Disney Publishing Worldwide, MeadWestvaco Corp. and General Electric Co.'s NBC News to create content that can be used with the pentop computer platform. LeapFrog says it will work with H-P to develop digital paper that can be printed on select H-P LaserJet printers.

Retailers such as Target Corp. and Wal-Mart Stores Inc. will stock the pen and its software near the consumer electronics section rather than in the toy aisle.

About 50 kids, ranging in age from 8 to 13, have been testing the pen for LeapFrog, giving input on everything from color combinations to game applications. Daniel Araujo, 13, one of the testers, says he would likely use the pen for homework and to play games. "I think it's really different," he says. "I've never seen a pen that can talk to you."

LeapFrog sees the new technology as a way to develop a nearly unlimited amount of content with other companies. The company says it will look into areas such as interactive comic books, graphic novels, magazines, trading cards and paper-based electronic games. "We're viewed as an educational toy company, but we don't view ourselves that way," says LeapFrog Chief Executive Tom Kalinske.


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