Microencapsulated electrophoretic displays (EPDs) are quickly emerging as an important technology for use in battery-powered portable computing devices. Thanks to bistability and their efficient reflective nature, these displays offer power savings on the order of 90% over liquid crystal displays (LCDs) commonly found in today's portable devices. EPD technology is also suitable for use in flexible displays opening the door for integrating much larger displays into small form factors for hand-held devices. Here we present a method for power reduction in next generation EPD displays with full color and video capability. A "smart driver" for power optimization of next-generation bistable displays is presented which reduces switching power consumption by as much as 50% without affecting quality of service. A more aggressive "lazy driver" capable of achieving significant additional energy savings in exchange for quality of service is also presented. Finally, important challenges engineers face as they work to advance EPD technology for use in future generation hand-held computing devices are explored.