Business Tech

Though presumed to be dead since it went bankrupt more than a year ago, CompUSA is showing signs of life.

As Wired noted in a post Thursday, there are 30 new retail outlets bearing the CompUSA name in the U.S. that are trying a new retail strategy that includes computers available for customers to do price matching on the Web sites of CompUSA's competitors.

Gilbert Fiorentino, chief executive of the Technology Products Group at Systemax, the company that bought CompUSA, told Wired: "We have invented this idea of retail 2.0...Every screen in every CompUSA store is now connected to the Internet and making buying a richer experience for customers."

While it's unclear whether it's going to be successful, it can't be any worse than its previous strategy, which found the once venerable electronics retailer in bankruptcyin December 2007.

At the time, the company was struggling with competition from rivals Best Buy and Circuit City, but Circuit City met a similar fate right before last year's big holiday shopping season and was forced to file for bankruptcy protection. (Earlier this year, the retailer shut its doors.) Circuit City's fall was due to pressure from online retail outlets like Amazon.com and NewEgg.com, but also the sudden economic collapse and resulting credit crunch. Don't look for Circuit City 2.0 though. It's clear to most retailers, including apparently CompUSA, that the future of retail electronics is focused in the direction of the Web.

Best Buy's fourth quarter was better than anticipated even though profits were down from a year ago amid an economic downturn. The company also noted that the quarter ended stronger than it began, indicating that consumer spending stabilized. And the Circuit City liquidation certainly didn't hurt Best Buy's cause.

The company reported net income of $570 million, or $1.35 a share, on revenue of $14.7 billion. In the same quarter a year a year ago, Best Buy reported net income of $737 million, or $1.71 a share, on revenue of $13.4 billion. Excluding restructuring charges, Best Buy reported earnings of $1.61 a share, well ahead of Thomson Reuters estimates of $1.40.

Same store sales, however, fell 4.8 percent in the quarter, which ended Feb. 28. Best Buy had cut its outlook, revised it, and restructured to prepare for the downturn. The company said it cut its inventory more than it had expected and faced product shortages late in the quarter.

For fiscal 2009, Best Buy reported earnings of $2.39 a share, down from $3.12 a share in fiscal 2008. Fiscal 2009 revenue was $45 billion, up from 13 percent a year ago. For the year ahead, Best Buy projects earnings of $2.50 to $2.90 a share on revenue of $46.5 billion to $48.5 billion. The company also projects same store sales to be flat to down 5 percent for the year. Analysts were expecting earnings of $2.45 a share.

In a statement, Best Buy executives portrayed the year ahead as one focused on cost-cutting and a rocky economy. However, the company should benefit from the liquidation of Circuit City. A negative factor is likely to be increased competition from Wal-Mart, which is increasingly focused on electronics. Best Buy estimated that its market share improved to almost 22 percent.

Best Buy CFO Jim Muehlbauer said:

We expect consumer spending to remain challenging in fiscal 2010, and the complex mix of external factors that will influence their behavior makes forecasting the future increasingly difficult.

Best Buy's breakdown of sales showed a few interesting cross currents. For instance, consumer electronics sales fell 8.6 percent and entertainment software fell 11 percent. Home office equipment surged 8.1 percent in the fourth quarter and notebook PC sales showed small gains.

(Credit: Larry Dignan/ZDNet)

Sometimes even a well-designed and innovative product can still be a total dud. See the Apple Newton.

The industry analysts at Forrester Research now say they know why this happens.

Forrester's new research method says TiVo's superior design is trumped by cable DVRs' convenience.

(Credit: TiVo)

In a new report released Friday, Forrester analyst James McQuivey zeroes in on what makes seemingly good products fall flat once they reach store shelves: lack of convenience. And he doesn't just mean "convenient" in that you can, for example, transfer a music device easily from your pocket to your car dashboard, but rather the entire experience using that music device--from buying the songs to putting them on that device, to having a battery that lasts long enough and can be easily recharged.

It's not enough to have simply the best design or be first to market, or have the best market researchers on your side to experience success in the electronics world. In the study, McQuivey uses TiVo as an example. Logically, TiVo should be the leader in the category it essentially invented. It was one of the first DVRs on the market, became the verb for recording a live TV show on a DVR, and has what is generally regarded as the best interface in its category. Yet the company has struggled from the beginning and has less than 2 million subscribers. Cable and satellite companies offer DVRs with far less functionality yet have 30 million DVR subscribers between them.

Lowest price doesn't necessarily mean guaranteed success either. Though the Eee PC from Asus and Acer's Aspire One Netbook are incredibly similar devices and the Eee PC is in some cases cheaper and was first to market, Acer is dominating the Netbook game.

The first Kindle was ugly and awkward, yet consumer still embraced it.

(Credit: Amazon.com)

Forrester says convenience is key. It defines the concept in this way: A "comprehensive measure that considers the total product experience." That includes researching the product, obtaining the device, using it, and eventually getting rid of it. The study also says that in successful products, convenience is not a benefit, but "a measure of how easy your product makes it for people to get the benefits your product promises."

The fewer things that stand in the way of using the product as it's intended (installation process, user interface, price, and availability at retail) the more convenient it is overall.

Think this all sounds rather obvious? Far more companies would release successful products if it were. (And then Forrester wouldn't be able to charge $750 for this report.)

A prime example of the convenience quotient in action is the Amazon Kindle, according to the study. The original version was downright ugly and awkward to use, but it's now judged to be an improbable success (moving what some analysts count as 500,000 units last year) considering how it was originally received, and the relatively high price of $399 and eventually $359.

But Forrester's new methodology would say it wasn't improbable at all, and in fact it was quite predictable. That's because of the convenience of accessing cheap, digital copies of books at the Kindle Store, and the ability to do it on the fly and wirelessly--without any need to sync up with a computer.

The same factor was likely at work with Apple's iPod success. The iPod is not as widely available at retail locations, or priced nearly as well as some of its competitors. Yet it's dominated the MP3 player market because of its convenient eco-system of iTunes software for organizing music files, iTunes Store, and the accompanying iPod.

It can also explain Acer's success in Netbooks. It wasn't first or lowest priced, but consumers have responded well to its decision to bundle its Aspire One Netbook with mobile broadband subscription services. A 3G contract subsidizes the price of the Netbook and enables customers to use Netbooks they way they're intended: accessing the Web quickly while on the go.

Forrester has just introduced this methodology and hasn't officially released its rating of products yet, but promises to do eight to 10 studies this year weighing gadgets by their convenience quotient.

Feel free to leave examples in the comments of gadgets you think this theory does or does not apply to.

Sony plans to close two television factories and shed 2,000 jobs in its home country of Japan, according to a Bloomberg report Wednesday.

The report says CEO Sir Howard Stringer will make the announcement in a news conference but doesn't say when.

When asked for confirmation of the planned cuts, a Sony representative told CNET News that the company has nothing new to announce.

Now, that can be interpreted many ways, but here's what's likely going on: While Sony may very well close some factories in Japan, it's probably not a new round of cuts, but instead part of the layoffs announced last month. Back then, Sony provided just a few basic details: 8,000 full-time employees and 8,000 contractors would be let go by 2010; and a TV factory in Pennsylvania and a video-tape factory in France would close.

Best Buy President and Chief Operating Officer Brian Dunn is set to be promoted to CEO this summer, when current Chief Executive Brad Anderson retires, the company announced Wednesday.

Anderson, who's led Best Buy for seven years, plans to retire from the electronics retailer at the company's annual meeting in June. He'll keep his position as vice chairman of the board of directors in order to help with the transition.

Dunn began his career at Best Buy as a store associate 23 years ago, rising through the company's ranks to become president and COO in 2006. He has been responsible for the company's 1,000 retail outlets in the United States, as well as its Geek Squad repair and installation services unit.

Best Buy is the largest consumer electronics retailer in the United States, and it has stores in 13 countries. It lost a major rival last week, when Circuit City, the second-largest electronics seller, was forced to liquidate all stores.

Although Best Buy has done comparatively well, it hasn't been unaffected by the current recession. Third-quarter revenue in 2008 dropped 77 percent from the year before, prompting the company to offer buyouts to nearly all corporate employees.

Intel's fourth-quarter warning is not only bad news but bad timing. With the Consumer Electronics Show kicking off Thursday adorned by all those bright, shiny gadgets, Intel effectively said: gadgets maybe, but not so bright and shiny.

And for an Intel warning, this one was particularly dire. The biggest chip bellwether said it now expects only $8.2 billion in revenue for the quarter, a 23 percent drop from the year-earlier period, and 20 percent from the third quarter. And this comes after issuing a warning on November 12.

So what's happening? The clearest example of the gloom that has descended on the chip industry, and by extension computer and gadget makers, came relatively early from another chip bellwether, Taiwan Semiconductor Manufacturing Company -- the largest chip contract manufacturer, which supplies chips to all the first-tier electronics and computer makers. Back on October 30, TSMC issued a forecast that set the tone for the rest of the industry: CEO Rick Tsai said the supply chain -- the myriad of companies that order chips from TSMC -- was "reducing inventory very aggressively."

That supply chain, either directly or indirectly, is the computer and gadget makers of the world.

So going into CES, the picture is not pretty. "We just heard consumer electronics sales over the holidays were down 26 percent year to year," said Broadpoint AmTech analyst Doug Freedman. "You want to head into CES with a pall over it? There it is, right there."

And go the other way, up the supply chain -- the chip gear makers who supply production equipment to chip companies -- and things are even more bleak, with some gear makers saying they don't expect any orders at all in 2009 for certain categories of equipment. In December, Netherlands-based ASML CEO Eric Meurice said that "never before have we witnessed such a sharp and sudden fall-off in lithography system demand."

Other examples are almost too numerous to list: for starters, Toshiba and SanDisk slashing flash memory output 30 percent, Taiwan's memory chip industry on the verge of collapse, and Micron Technology posting a massive $706 million loss.

Yes, there's probably a silver lining in all of this, in that chipmakers and gadget suppliers have to cut the fat and become lean and mean, but where does it end?

And how will this downturn transform the computer industry? Looking at it through the prism of Netbooks -- which are expected to catch much of the limelight at CES -- may provide some insight. These cheap laptop computers are on fire, partially because they are compelling designs but mostly because of price. Good thing? Yeah, great for consumers and small businesses that are finally realizing they don't have to pay $2,000 for a small, lightweight ultraportable notebook. Or simply can't afford a $1,000 notebook.

But not so great for Intel, Apple, and others. "What is the most expensive laptop out there? The Apple (MacBook) Air," said Freedman. "That's a $1,500 or $2,000 machine. Now all of a sudden I'm giving you ultraportability for $500," he said, referring to the price of a Netbook.

In this sense, over-priced notebooks could be seen as roughly equivalent to large SUVs -- overkill. Just as General Motors must wean itself off lumbering SUVs, so may Intel, Hewlett-Packard, Sony, Toshiba, et al., be forced, to some extent, to wean themselves off high-profit notebook computers. After all, what took Sony so long to bring out a Netbook? And why don't we see an Apple Netbook? It's not a stretch to say that those companies don't like the idea of selling a lot of inexpensive computers.

At CES, companies will be hawking flashy gadgets, as always, and maybe attendees can suspend disbelief for a few days blinded by the glare of the gadgets. But that's really just lipstick on a pig.

Update, Monday 7:08 a.m. PST: Added information on Wal-Mart's Black Friday deals.

Usually Black Friday is a good time of year for consumers and retailers. It's when retailers get "in the black" by getting rid of a lot of excess inventory through offering drastic discounts.

This year is different. The economy has crumbled, consumers plan on spending less, and at least for those shopping for electronics, there are fewer viable options with many Circuit City stores set to close.

Some bargain hunters have complained that, so far, they haven't seen as many great deals as they're used to this time of year as the circular Black Friday ads for major retailers get leaked ahead of time.

CNET News caught up with some retail and Black Friday specialists to ask them if and where good deals can be found this season.

For electronics, the best deals may not be found at the Best Buys and Wal-Marts of the world this year, says Daniel de Grandpre, CEO of Dealnews, a bargain-tracking site. He recommends regional competitors to the international chains. "Look towards MicroCenter, Fry's Electronics, Meijer, and others for better Black Friday deals. MicroCenter's weekend sale has some outstanding deals."

There will also be great deals on the Web. Not just online-only retailers like Newegg.com and Amazon.com, but the Web sites of your favorite stores, too. All major retailers with Web stores maintain different inventories for their brick-and-mortar and online outlets, and will try to entice customers with "Web only" discounts.

A lot more sites will be enticing consumers with offers of free shipping this year. "Free shipping will be prevalent," as will specials on gift cards or offers of no sales tax, according to John Squire, chief strategy officer for Coremetrics, which tracks online retail sales. Also look for more online coupons and "minimum basket values," which are free goods or other enticements if you spend a certain amount of money.

Despite all of this, uncertainty is rampant among retailers.

"In the past, these things were a lot easier to predict than this year," said Squire of Coremetrics. In years past, holiday sales were generally up 20 percent on Black Friday and the following Monday, and the top sales day has been easy to pinpoint as December 9.

"But since the drop of the stock market and complete falloff in consumer spending in October...it's hard to give distinct numbers for Black Friday or Cyber Monday this year."

But that doesn't mean holiday discounts won't be as generous this year. Dealnews' de Grandpre says being less aggressive on prices this year would be a risky strategy.

"Shoppers are savvier than ever. They have access to far more information than ever," by doing advance comparison shopping with Black Friday tracking sites, he said. "If a retailer doesn't offer a suitable 'doorbuster' to drive traffic to its stores, buyers will look for someone else who does."

Some retailers are doing Black Friday month specials, rather than confining their deep discounts to just the day following Thanksgiving.

Black Friday "is the best single day for bargains, without question. However, there are Black Friday-like deals happening now," according to de Grandpre. "(Beginning in October), we've already seen a Blu-ray player for $170 with $70 in free Blu-ray movies--akin to getting the player for $100. We've also seen a 42-inch 720p LCD HDTV for $600, and a Kingston 32GB USB Flash Drive for $30, both with free shipping."

Kmart, for example, officially started offering "Early Black Friday" deals on November 2 (registration required), in an attempt to entice buyers who are expected to be more conservative about their spending this holiday.

Still, the long Thanksgiving weekend is a key one for retailers looking to lure consumers in droves. On Monday, for instance, Wal-Mart touted its "three days of Black Friday," which it's kicking off with online deals starting Thursday ahead of in-store offerings Friday and Saturday.

The Consumer Electronics Association says consumers it's polled this year plan to spend $200 less on the holidays, and retailers were bracing early for reduced demand this season.

Clearly, buying will be down across the board for the holiday season, said Squire of CoreMetrics. The key is retailers being able to deliver the right mix of merchandise that price-conscious consumers want.

"For merchandisers that have a broad selection, and ones they can change around, they're going to do really well," he said. "Those that have erred on the side of luxury goods will struggle."

More dire forecasts for the chip industry.

On the heels of comments from a chip industry watchdog group last week saying the chip equipment business is "on hold," Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chip manufacturer, said PC-related chip shipments are expected to be off 20 percent in the fourth quarter.

This bodes ill for PC makers, which appear to be cutting way back on chip orders.

"(For) our fourth quarter computer-related wafer shipments...we expect to see over a 20 percent decline. Which is very severe...compared to a seasonal mid-teens percentage growth," said CEO Rick Tsai on Thursday, speaking during the company's earnings announcement.

TSMC is considered an industry bellwether because it makes graphics chips for both Advanced Micro Devices and Nvidia and manufactures a variety of chips that go into cell phones and consumer electronics devices as well as other chips for PCs.

The "supply chain"--the myriad of companies that order chips from TSMC--is "reducing inventory very aggressively," he said.

Because of the state of the world's financial markets, "most our customers are aggressively paring their inventories and have thus reduced significantly their wafer demand," said Lora Ho, VP and chief financial officer of TSMC.

"We believe the foundry sector will likely underperform the overall semiconductor industry in 2009," he said. Foundry refers to a contract chip manufacturer. "In 2009, we now expect the semiconductor industry to decline by mid-to high single digit in 2009. With very little visibility."

TSMC reported a net profit of NT$30.574 billion ($930 million) in the July-September quarter, the company said Thursday. That was slightly higher than NT$30.4 billion reported a year ago.

Chartered Semiconductor, another large contract chip manufacturer, also said on Thursday that it "started to see orders declining from the middle of August, followed by some customer requests to reschedule deliveries forward. The weakness is expected to deepen into the fourth quarter."

The prepared comments continued: "Based on current outlook, we are guiding for Chartered revenues to be down approximately 21 percent sequentially...in the fourth quarter. In line with the demand outlook, we are also reducing our capital expenditure for 2008 to $650 million, which is $100 million lower than the amount we had earlier anticipated."

Electronics and entertainment giant Sony warned investors on Wednesday that its yearly profits will be far below what the company anticipated.

The Japanese company said it expects to record $1.5 billion (150 billion yen) in profit for the current fiscal year, which is a 59 percent drop from the previous year.

Intense competition on LCD TV prices hurt Sony this year.

(Credit: CNET)

In July, Sony said it expected to post profits of $2.4 billion, or 240 billion yen.

One of the main culprits has been the increasingly unfavorable yen-to-dollar conversion rate. The company's headquarters are in Tokyo, but the bulk of its business is in the United States and Europe, two areas where the current global economic downturn is being felt the strongest.

While its gaming and movies divisions' upcoming yearly results are in line with expectations, Sony said its consumer electronics business has been hurt by slowing sales of televisions and cameras, according to The Associated Press. The rapidly falling prices in the broader flat-panel TV industry are also to blame, Sony said.

The company is due to report its fourth-quarter and yearly earnings next Wednesday. For the quarter, Sony expects to record $215.2 million (21 billion yen) in profit, a 72 percent decrease from a year ago, and sales of $21.2 billion (2.07 trillion yen), a 1 percent decrease.