Commentary: Hello, consumer electronics

By Jed Kolko, Principal Analyst

With its array of new gadgets, Dell joins the other PC vendors that are moving into the crowded consumer electronics market. Success will depend on device integration, in-store presence and the shift to home networks.

Dell is promising to bring an MP3 player, a digital music service and an LCD (liquid crystal display) TV/monitor to market for the holidays. Its new devices will join Gateway's plasma TVs, Hewlett-Packard's digital cameras and media receiver, and Apple Computer's iPod on the list of consumer electronics goods traditional PC makers introduced. Dell enjoys a strong brand and PC market leadership, but Dell, HP and Gateway will succeed in consumer electronics only if they:

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• Don't sell consumer electronics as you do computers. When buying PCs, Dell shoppers configure their machines and buy online. But consumers buy electronics differently. Few consumers buy high-end TVs without comparing models in person, and even fewer buy high-end TVs online. Without its stores, Gateway couldn't sell plasma TVs. Likewise, Dell needs kiosks or retail partners to show off its new TV/monitors and to short-circuit worries about shipping fancy screens.

• Resist the temptation to push the networked home too fast. Home networking is still in its infancy, and entertainment applications won't take off until 2005. HP, Sony and others jumped the gun with devices that move PC content to the TV and stereo. Dell should hold back from building a multifunction media center--and focus instead on bundling networking gear with PCs and supporting home network installation.

© 2003, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.