May 3, 2004 4:00 AM PDT

Home PCs to gain multimedia savvy

Though springtime is still upon us, chip giant Intel and computer manufacturers are busy thinking up ways to reinvent the home PC for the 2004 holiday season.

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What's new:
Intel has developed chipsets with "entertainment" and "lifestyle" PCs--two new types of digital-hub-style machines--in mind and created entertainment PC prototypes to inspire PC makers to get with its program.

Bottom line:
Though the new machines will be designed to be attractive and offer new capabilities, PC makers may not oblige by building both of them, and consumers may not choose them over other, less pricey desktops options.

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Having taken note of consumers' growing demand for music, video and other digital content, the companies have begun shifting the PC to the role of multimedia hub for the home.

Desktop PCs have changed little over the years, but Intel believes 2004 could be a turning point for desktop design. The chipmaker, whose processors will play a role in the transition, predicts that two new consumer desktop categories--"entertainment" PCs and "lifestyle" PCs--could gain a foothold as the year progresses.

"Our research showed that people want to use PCs within these different scenarios. We think it's a new opportunity for us and the PC industry," said Bill Leszinske, director of digital home marketing and planning at Intel. "This is something we've been driving. I think the (PC makers) are pretty accepting of it, and you'll see lots of them later this year."

Entertainment PCs will be designed to emulate a home stereo or video component, such as a VCR, and will serve to handle consumer's audio and video needs by playing music and DVDs, recording TV programs and even showing picture slide shows on a TV. Most entertainment PCs will be purchased without monitors and will be operated almost exclusively via a remote control.

Lifestyle PCs, designed to inhabit bedrooms and kitchens, will look more like the familiar desktop. The high-end machines will be more stylish, however, and will also be operable via remote control, allowing consumers to use them to write an e-mail and then later play a video or some music. Most lifestyle PCs will also come with multimedia software such as Microsoft's Windows XP Media Center operating system, according to Intel.

Intel is banking on the new desktops to help boost PC sales to consumers and thus help it sell more processors and chipsets. The consumer market represents a major portion of the world's PCs. It accounted for 37 percent of worldwide unit shipments in 2003, for example, according to market researcher IDC. Intel has even developed chipsets with the new types of PCs in mind and created entertainment PC prototypes, designed to inspire PC makers to move in that direction.

The chipmaker plans to release its latest desktop PC chipset, "Grantsdale," in June. Chipsets handle a PC's incoming and outgoing data, shuttling it around inside the machine. Grantsdale and a sister chipset, "Alderwood," will pack things like higher performance memory and faster graphics and will also let PC makers build wireless networking into their machines. The chipsets will be used in a broad range of desktops, not just the entertainment and lifestyle PCs.

The digital home idea, which centers on the sharing of files among various home electronics devices, has been tried before. But Leszinske said he believes it could finally take off with the advent of the new types of PCs, as well as things like new online music services and widespread use of digital video recorders.

"We think the Grantsdale platform and some other things, such as (online music service) Napster that are happening this year in the marketplace are going to make the digital home real," Leszinske said.

Still, the digital home concept has seen several false starts over the past few years, including the failure of the first generation of digital receivers, created to allow file-sharing between PCs and devices like stereos. Intel's vision could also hit snags like consumer reluctance to pony up for new gadgets. But, as Leszinske said, Intel is not alone in its enthusiasm.

Last year, several PC makers, including Gateway, Dell and Hewlett-Packard got on board with new digital home initiatives and began delivering new products, including digital televisions and Media Center PCs.

As part of its effort to establish a consumer electronics business, Gateway already offers PCs that resemble Intel's vision of the entertainment and lifestyle machines: the Gateway 901 and the all-in-one Gateway 610 Media Center. The company, which recently acquired eMachines, will continue to offer such products, a company executive said.

Meanwhile, Dell and Hewlett-Packard are each evaluating entertainment PCs of their own, measures that bolster Intel's effort. One HP executive said the entertainment PC makes sense, given how consumers use HP's current line of Media Center PCs.

"The media center has moved into rooms like the family room, and people are connecting it to their (televisions) and are primarily using it as an (audio and video) product now," said Ameer Karim, HP's manager of worldwide product marketing for consumer desktops. That shows "maybe there's an opportunity here that we should be exploring."

Karim added that HP could release an entertainment PC-like product by the holiday season. Dell did not put a time frame on its entertainment PC explorations.

While consumers stand to benefit from Intel's new chipset hardware by gaining higher performance graphics and features such as dual-monitor support, there is, of course another side: Adding new products like entertainment and lifestyle desktops is a necessity in order for PC makers to pump up sales, one analyst said.

"In the eyes of the PC makers, (multimedia) is the next stage in trying to stimulate consumer demand," said Alan Promisel, analyst with IDC. "There needs to be development of new form factors and usage models to stimulate growth."

There's no guarantee, however, that large numbers of consumers will shell out for second PCs for the living room or for bedrooms and kitchens. Many families in the United States now have multiple PCs, because they've kept their older machine around after purchasing a new one, analysts have said. Some families will say, "I can't afford or I don't want an (entertainment PC) in my house," Leszinske admitted.

Indeed, the new types of PCs will be fairly pricey by today's retail market standards, where many PCs sell for $600 or less. An entertainment PC might start somewhere between about $700 and $900 and sell for as much as $1,400. A lifestyle PC could start at as little as about $600, but a model that incorporates a large flat panel display, as many are likely to do, could sell for as much as $2,000 or more, Leszinske said.

Also, some companies, including Dell and HP, will develop alternative, and less expensive, devices called media adapters, which also serve to allow file-sharing between electronic devices. The PC makers have announced plans to offer a special media adapter called the Windows Media Center Extender, which will let consumers view Media Center files on other displays such as televisions. Not one to be left out, Intel will also have a hand in the media adapter market.

Despite the potential pitfalls, there's no time like the present for launching a new consumer PC, said Steve Baker, analyst with NPD Techworld. That's because desktop PC unit sales rose 17 percent year over year at retail in the United States during the first quarter, and although most of that growth was at the low-end of the market, there's still a relatively healthy market for more expensive desktops, Baker said.

Much of the unit sales growth came from PCs priced at less than $600 or more than $1,200, Baker said. That means that while many people bought low-price PCs, many others are willing to pay extra for a desktop, such as a Media Center PC, that they feel has some extra value. That should give Intel and the PC makers some encouragement, he said.

"The evidence shows that (the digital home concept) is starting to resonate with people," Baker said. Thus, "If you look at all these things coming together, and you're a natural optimist?it says that there is some momentum here."

 

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