Business Tech

Eee PCs on display at the 2009 edition of CeBit. For more Eee PC photos, click on the image. (Note: The captions are in German.)

(Credit: ZDNet Germany)

HANNOVER, Germany--Asus is to phase out its 7-inch-screen Eee PC Netbooks in mature markets, company chairman Jonney Shih said on Tuesday.

During a press conference at the CeBit technology show here, Shih told ZDNet UK that the manufacturer would concentrate on its 10-inch Netbooks, which he said customers preferred. He denied recent reports that Asus would phase out its 8.9-inch Netbooks. However, he did say that it would cut 7-inch Eee PCs--the original size for the line--from its catalog.

Asus Chairman Jonney Shih at CeBit.

(Credit: ZDNet UK)

"It seems that customers prefer to have a greater screen, which also means a larger keyboard," Shih said. "I still believe we have a good opportunity in 8.9-inch for kids, telecoms (providers) or emerging markets. The 7-inch (Netbook) is going to be phased out, although some emerging countries may still have some demand."

Asus has previously had to deny rumors that it would remove all its sub-10-inch Netbooks from its range. In November, it said both its 8.9-inch and 7-inch Netbooks would survive with refreshed specifications.

At CeBit, the annual spring tech show, Asus showed off a variety of new and recently announced products. It offered up an Eee videophone, an Eee NAS PC, and several new notebooks, including the Eee PC "Seashell" 1008HA, which is a one-inch-thick, 10-inch-screen version of the Eee Netbook design.

Philip Schoonover, chairman, president, and CEO of embattled electronics retailer Circuit City, resigned Monday, the company announced.

His resignation is effective immediately, and he will be replaced by James Marcum as president and CEO, and by Allen King as chairman of the board of directors.

          Philip Schoonover

(Credit: Circuit City)

Marcum joined Circuit City's board in June and was elected vice chairman in August. His specialty is electronics retail--he was selected in order to help the struggling retailer while it tries to right itself. He has helped several other specialty retailers while in the midst of their own turnarounds.

Newly installed chairman King said in a statement, "The board of directors is committed to accelerating the pace of the company's turnaround. Since he joined the board in June, Jim has been very effective in partnering with senior management and in helping identify opportunities to deliver increased value for our shareholders, customers, vendors and associates over the long term. We look forward to his continued contributions in this new important role."

Schoonover became company president in 2005, and ascended to the chairman and CEO's office a year later. But Circuit City has struggled. It posted a $200 million loss in December 2007, and has improved only moderately since then. The company expects to report losses in the range of $170 million to $185 million for the current quarter. Those results will be announced next week.

Earlier this year, a potential savior--albeit an unexpected one--appeared when Blockbuster announced it was interested in taking over Circuit City. The electronics retailer wasn't open to the video rental chain's advances, and one particularly vocal investor publicly encouraged Schoonover to consider the sale to Blockbuster or to a private equity firm.

Blockbuster withdrew its offer in July after perusing the retailer's books.

Circuit City is not the only electronics retailer struggling. CompUSA looked to be rescued when Mexican billionaire Carlos Slim Helu purchased the retail chain, only to close down much of the branches and sell the remaining few to a private equity firm last year, which sold the brand to Systemax.

Best Buy doesn't have the same problem. In the midst of an economic downturn, the company last reported earnings of $737 million.

The roughly two-month shopping period before school starts is typically fruitful for consumer electronics retailers. Not this year.

All categories combined showed minimal growth. Although notebook sales increased 10 percent over the same period the year before, desktops were down 3 percent. And products that have been guaranteed big sellers in past years continue to lose momentum: digital-camera sales were down 1 percent, printer sales were even, and MP3 player sales were up 7 percent.

Will Netbooks give electronics retailers the bump they need this holiday shopping season?

(Credit: Hewlett-Packard)

This is especially concerning to electronics retailers, since the all-important holiday shopping season is approaching, a time when they typically can expect to play catch-up in yearly sales and revenue.

"The holiday (period) is likely to look a lot like back-to-school, I think," said Steve Baker, vice president of industry analysis for NPD Group, which tracks electronics retailing. There's likely to be "a little bit better demand" because there are a broader array of categories that people shop for during the holiday. For back-to-school, retailers push mostly computers and peripherals.

The problem with notebooks: they've been selling so well for so long that the category just can't sustain that kind of growth forever. Growth percentages in years past for laptops during the back-to-school shopping period have been in the high teens and low 20s, which is why 10 percent growth this year is disappointing for retailers.

And when a market matures, steep price declines are harder for retailers to offer. Notebooks from brand names have been routinely available for less than $600 for a while, and retailers are finding it harder to cut prices and maintain acceptable profit margins. The same could be true for Black Friday and beyond, when retailers usually unveil their best deals of the year.

Of course, back-to-school shopping isn't a perfect indicator for holiday shopping, especially when it comes to an important category like notebooks. Portable PCs will become even harder to predict this year because of the so-called wild card that Netbooks present. Every major PC maker has one now, but they haven't been available in large volumes. This will change in the next few weeks, and it will be interesting to see if mainstream consumers find a use for them.

New product categories, combined with disturbing financial news, makes it harder for electronics retailers to feel comfortable heading into the holiday season.

"The word everyone (in electronics retail) uses when I talk to them is 'uncertainty,'" Baker said. "People can handle, 'We're sure it's going to be bad,' or, 'We're sure it's going to be good.' But 'We're not sure what it's going to be' is tough to plan against."