January 3, 2002 4:00 AM PST

CES offers electronics makers new hope

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Will interactive TV dominate CES?
Allison Thacker, analyst, RS Investments
Consumer electronics companies will get a chance to change their luck next week in Las Vegas.

After a dismal 2001, companies plan to use this year's Consumer Electronics Show to introduce upcoming products and announce new strategies aimed at reviving consumer interest in gadgetry. CES starts Monday and runs through Jan. 11.

As was the case last year, one of the dominant themes of the show will be the convergence of computers and consumer electronics devices.

Microsoft Chairman Bill Gates will kick off the show Monday with a keynote speech, discussing how computers with the Windows XP operating system can be used to store, record and play digital video and audio, as well as link other devices through wireless networking.

The obstacle to such advances isn't a lack of consumer interest, analysts say. Rather, it's the struggle to make the technology easier to use.

"The industry has been challenged in making digital content convenient to find and access, as well as affordable to consumers," IDC analyst Susan Kevorkian said. "The switch over to digital content has been slow because responsibility lies on the industry and not just one company."

Gates' keynote speech is also expected to emphasize that Microsoft technologies--mainly XP and the .Net software-as-a-service strategy--are key vehicles for bringing about the convergence of PCs and consumer electronics.

Front and center will be Microsoft's eHome division, which the company formed after last year's CES. Part of the division's mission is to propagate a wide variety of digital devices with Windows, extending the operating system far beyond its desktop roots.

Mike Toutonghi, head of the eHome division, made it clear in an interview late last year that Microsoft could not have delivered on its digital device strategy with Windows 98 or Me.

"With XP and the underlying technologies--whether that's networking technologies, communication technologies, or media technologies--we're finally at the stage where we can deliver these kinds of experiences to consumers," he said.

Just press "play"
At CES, Toutonghi's group is expected to announce the first products that eHome plans to deliver.

"Our primary focus is entertainment and communication scenarios," he said. "Our focus groups and what our partners and consumers are telling us is that (consumers are) most interested in entertainment scenarios, whether those be videos, photos, music--those kinds of things. They're interested ww


CNET.com editorial director Steve Fox previews the CES show.

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in communications scenarios. They're interested in how to bring those things together in a way to make them simple, accessible to the entire family."

Another anticipated announcement at CES will come from start-up Rearden Steel, which is expected to debut a product it has been working on for two years. Rearden Steel founder and CEO Steve Perlman is best known for launching WebTV, which he sold to Microsoft in 1997 for an estimated $500 million.

According to sources, Rearden Steel has developed a platform targeting the interactive TV market but could expand into wireless networking that will allow devices to communicate with one another sans cables. The company is also expected to announce partnerships, which will play a key role in the success of Rearden Steel's product.

Start-up Dataplay plans to announce partnerships with hardware makers and will demonstrate portable digital-audio players that use its discs, which are roughly the size of a quarter and have a 500MB capacity. According to the company, drives that can read the discs have been distributed to manufacturers, and portable players will be available this year costing between $199 and $299.

One of the first players to use Dataplay's discs will come from Evolution, which is expected to release a device in late March. Samsung is also expected to release this year a player using Dataplay media.

Blank discs from Dataplay are expected in the first quarter, and discs with protected audio content from music labels, such as EMI Recorded Music, Universal and BMG Entertainment, are expected later this year.

Sonicblue is also expected to demonstrate an upcoming portable digital-audio player, as well as its Rio Advanced Digital Audio Center. The portable player will feature a 20GB hard drive, putting it in competition with Creative Labs' Nomad Jukebox device.

The Rio Advanced Digital Audio Center is a $1,500 home entertainment hub that features a 40GB hard drive and allows consumers to play digital audio from its hard drive on receivers placed throughout their homes.

The convergence conundrum
Digital music players, however, are a good example of the problems companies face with the concept of convergence.

"MP3 players tend to still be a small market," NPD Intelect analyst Stephen Baker said. "What it's turning into is that all these other devices--CD players, DVD players and the like--are MP3-enabled, so they can play the songs across all your devices. Those are the kinds of things where we're seeing a lot of growth."

Meanwhile, Hewlett-Packard is trying to make it easier for consumers to use its digital imaging products. CEO Carly Fiorina's keynote speech on Tuesday will focus on digital imaging and advances to make the technology more convenient.

The company will be demonstrating a notebook that comes with built-in capabilities for either 802.11b or Bluetooth wireless networking.

Also looking to make a splash at CES are rivals XM Satellite Radio and Sirius Satellite Radio, both of which hope to get millions of consumers to pay subscription fees around $10 a month for access to dozens of channels of specialty music, news and talk. Signals are delivered by satellite to specially equipped car and home receivers.

XM launched its service in November and is conducting an aggressive marketing campaign for car stereo receivers that can tune into its service. Sirius plans to launch its service Feb. 14. Recent reports from analysts at S.G. Cowen and Lehman Brothers cite better-than-expected subscriber numbers for XM, boosting hopes for the satellite radio market.

An XM marketing executive said manufacturing partners such as Sony and Alpine are expected to announce new XM-ready car stereo equipment at the show. Announcements regarding further XM support from automakers are expected from the International Auto Show in Detroit, happening the same week as CES.

General Motors recently began offering XM receivers as an option in several Cadillac models. Plans for uses outside the car currently are limited to a Sony XM receiver that can be adapted for use with an existing home or car stereo.

Electronic oddities
As usual, CES will have its share of electronic oddities this year.

Timex will show off a "satellite" watch that connects with Global Positioning System navigation signals to compute a runner's speed and distance traveled.

Technology Enabled Clothing will model the Scott eVest, a bulky black garment with lots of pockets for stowing gadgets and networking infrastructure that can connect a handheld computer in one pocket to the cell phone in another.

Sanyo Fisher will announce a foul-language filter that can be used on televisions, videos and DVDs. Olympic champion and spokeswoman Mary Lou Retton will be on hand to try to get consumers to flip for the product.

Ectaco will demonstrate the Universal Translator, a portable speech-recognition device that translates between English and French, German or Spanish.

At the same time that CES is unfolding in Las Vegas, Apple Computer fans will be congregating in San Francisco for the Macworld Expo. Apple CEO Steve Jobs is expected to deliver a similar message to Gates', touting the convergence of electronic devices around the computer. Apple is already helping the cause. Last year, the company delivered a wide range of digital products, including the iPod digital music player and software for recording digital music, making movies, and authoring DVDs.

Despite such efforts from Apple and Microsoft, Baker noted that the consumer adoption of digital devices that attach to PCs is still "taking longer than us IT guys would like."

News.com's Joe Wilcox contributed to this report.

 

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