Business Tech

TV makers worldwide saw their revenues slide 12 percent in the last year, according to a report set to be released Tuesday by DisplaySearch.

A total of 43.3 million TVs were sold worldwide in the first quarter of this year, a 6 percent drop compared to the same quarter a year ago, and prices dropped 6 percent, too, according to the Quarterly Global TV Shipment and Forecast Report.

Even Samsung, which collects more money in its coffers for TVs than any company in the world for the past 13 straight quarters, saw its revenues drop 8 percent since the same time last year. But it still held its lead in the industry, maintaining a 21.5 percent share of dollars spent on TVs worldwide.

The biggest shake-up in the last quarter came from LG Electronics which, at 2 percent growth from a year ago, was the only one of the top five manufacturers to see an uptick in revenues. It was able to leapfrog Sony into second place, claiming 13.3 percent of the TV market. Sony garnered 13.1 percent, followed by Sharp with 7.2 percent, and Panasonic with 6.1 percent.

Panasonic appeared to have the most trouble in the most recent quarter. It saw revenues from TV sales drop 22 percent over the last year.

These kinds of slumping progress reports from all sectors of the technology industry have become practically commonplace. Declining revenues are particularly a problem in consumer electronics as shoppers are finding themselves with less discretionary income.

A few months after being ousted as chief executive of Seagate, Bill Watkins is back with a new start-up that's cooking up ways to pack high-density flash memory chips into small devices.

Bill Watkins

(Credit: Erica Ogg/CNET)

Watkins is now a board member of Vertical Circuits, which is developing a "silver ooze" intended to make already small devices, like laptops and handheld gadgets, even thinner, The New York Times reports.

Vertical Circuits' main business is working on "3D stacking," which looks to decrease the space between memory chips by stacking them on top of each other, thereby creating smaller devices. The "ooze" is a patented substance that creates electrical connections between chips, taking away the need for wires to join them. Vertical Circuits says it takes out 1.6 millimeters of space between chips.

Watkins told the Times he's amazed by how valuable that space is for some companies: "The thing that has stunned me is how much a Dell or Apple will pay for thinness...there's a big difference for them between 2 millimeters and 1 millimeter on some of this stuff."

Vertical Circuits isn't announcing which companies it has partnered with yet, and it still has yet to turn a profit. Both are coming sometime in "the next few quarters," the company says.

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.

The Consumer Electronics Association says the money made from electronics shipments in the fourth quarter of this year will be basically on par as the same quarter a year ago.

That's not good news for gadget makers. For the fourth quarter of this year, the revenue from products shipped will increase by a negligible 0.1 percent over the same quarter in 2007, according to the CEA's revised forecast. The industry group had previously predicted electronics shipment revenue would grow 3.7 percent for the quarter.

Unsurprisingly, the economy is being blamed for the stagnating growth.

"Although CEA certainly took price declines and weakness in consumer demand into consideration, the severity and the speed of declines in these unprecedented times caught everyone off guard," Jason Oxman, CEA's senior vice president of industry affairs, said in a statement. "Consumer sentiment is improving, but shopper unease this holiday season is creating challenges for all sectors of the economy, including consumer electronics."

Falling TV prices have hurt revenue, as has the increased interest in lower-priced laptops and Netbooks, according to the CEA. Cell phones should also be hit particularly hard during the final quarter of the year, when growth is now estimated to be just 5 percent, down from the previously expected 11 percent.

Looking for signs that netbooks are catching on? And even morphing into notebooks? Here's a few.

Netbooks were the big end-user gadget on display at the Windows Hardware Engineering Conference that ended Friday.

And all the Netbooks at a Microsoft booth were running Windows 7, Microsoft's next-generation operating system due next year.

A Microsoft person on the floor said that a lite version of Windows 7 will run on 1GB of memory and 16GB of (solid-state drive) storage. Higher-end Netbooks will have a 160GB hard disk drive, according to Microsoft "guidance."

Microsoft displayed Netbooks running Windows 7 at WinHEC

(Credit: Brooke Crothers)

This person also said something surprising. Dual-core Atom processors will be used in Netbooks. I tried to disabuse him of the notion that netbooks would get dual-core Atom processors. No, I said, it was Nettops (Atom-based desktops) that would get dual-core. But he assured me that vendors were planning to bring out dual-core Netbooks.

So, I contacted Intel. There are no immediate plans for dual-core Atom chips designed specifically for Netbooks, according to Intel. But what's stopping a netbook supplier from using a dual-core Atom 330 (designed for nettops) in a Netbook? Answer: nothing.

At 8 watts, the chip has a higher power envelope than single-core Atom processors, but 8 watts is still low compared with a mainstream Core 2 Duo processor. Other specifications for the Atom 330 include a core clock speed of 1.6GHz, 1MB of level-2 cache, and support for DDR2 667MHz memory.

Beginning to sound more like a low-end notebook? I think so.

Netbook market share appears to be growing too. A little more than 5 million Atom processors shipped in the third quarter of 2008, according to Shane Rau of IDC, a market researcher. "Will it add to the total market or will it eat into the total market? Another question might be is Atom eating into another processor brand such as Celeron (Intel) or Sempron (AMD)?"

Rau says that the total market can grow while Netbooks eat into notebook market share. "The TAM (Total Available Market) can grow even as Atom eats into another brand. But we don't know how it's shaking out yet," he said.

And here's evidence of Netbooks penetrating the consumer consciousness. Best Buy now has a separate category for Netbooks on its Web site. Right under laptop computers you'll see "Netbooks". Interestingly, the Netbooks category is ranked above desktops and most other "computer" categories.

Other signs. Dell has a 12-inch laptop, the Inspiron Mini 12 based on the Atom processor. Is this a Netbook or notebook? You tell me.

Intel's CEO Paul Otellini demos new mobile tech.

(Credit: Josh Lowensohn/CNET Networks)

SAN FRANCISCO--There is a light at the end of the dark financial tunnel, Intel President and CEO Paul Otellini said onstage at the Web 2.0 Summit on Thursday morning. And he brought out a shiny new toy to prove it.

"All the smart people I've talked to in this area suggest that the U.S. is in a two- to three-quarter recession," Otellini said, though he added that the current economic slowdown is "the deepest one I've seen in my lifetime" and predicted that morale may stay low for longer because unemployment may remain high even after growth has resumed.

The point of his talk, though, was to focus on the good stuff, namely the innovation that will still be on the way regardless of how far the markets fall. "I like coming here," Otellini said of the Web 2.0 conference. "It's a respite from, sort of, watching the stock market crash every day, and think about what the future is going to hold for us."

Otellini showed off two projects that the company is working on internally. One of them is a business-networking software product that Otellini said will make a big difference in how employees of large corporations socialize and network with one another, learn more about the company, and collaborate on products. In a demonstration of the prototype, the CEO suggested that it was something that could eventually make a difference for many companies.

"There's an interesting thing about businesses and software," he said. "They pay for it. If you're looking for a business model that might be interesting, finding a way to capture the needs of enterprises...is a pretty good way of making a living."

But the more impressive of the two demonstrations was a shadowy, unnamed handheld gadget that's so early in its development that Otellini admitted it had to be powered by computers backstage. Otellini showed how the always-connected device, which resembled an iPhone and which Intel has shown off a few times before, could use a "smart" camera to translate Chinese text into English almost instantly, and gain product information and reviews when hovering over a toy for sale. With no release date, it was effectively the mobile gadget world's equivalent of a slick concept car at an auto show.

But it hasn't been all fun, games, and shiny toys for Intel recently. He admitted that the aforementioned mystery concept gadget would require "a really good, first-class broadband infrastructure around the world." Intel's support of the always-just-a-milestone-away WiMax technology is one of the company's biggest challenges, and critics have been skeptical of the company's reliance on WiMax's success in its projections for the future.

Additionally, Intel supplies the chips for Apple's desktop and laptop machines, a landmark partnership that has been several years running now. But the relationship became strained recently when Intel started holding up Apple's iPhone as a device that suffers technologically from not having one of its chips in place.

Otellini generally avoided talking about this, saying that he sees huge potential in the iPhone--"Our phones started ringing the day after the iPhone was launched"--as well as other mobile technologies in general. Beyond a few ambiguous words about the iPhone, he was mum on Apple.

In conclusion, Web 2.0 Summit co-host John Battelle of Federated Media brought up a quotation from former Intel Chairman and CEO Andy Grove, "only the paranoid survive," and asked Otellini to reflect on the statement and what he was afraid of.

"(Grove) said that to reflect, to some extent, the risk characteristic of our business, of our industry," Otellini said. "There's always a new technology that's potentially disruptive to your entire business model. What he was worried about was something coming up to disrupt it...I try to live by that."

When Leslie Martinez walked into a Los Angeles-area Best Buy two weeks ago looking only for a 40-inch Sony Bravia LCD TV, she walked out with a heavily discounted Blu-ray Disc player, some Blu-ray movies, and half-priced HDTV accessories.

After seeing the TV she wanted at Costco, she turned to Best Buy to see if they could match the price. In the end, after a bit of negotiating with a salesman, the electronics retailer did much more than that.

"He made it almost impossible to walk away," Martinez said.

Retailers have offered bundled Blu-ray players with TVs before, but the way Martinez was able to haggle over the details sounds more like buying a car, not purchasing a TV at the biggest electronics retailer in the nation. And this is before the all-important late-year holiday sales rush, when the most attractive prices are normally found. It could be a sign that many of the best deals offered this holiday will be earlier, when retailers are still nervous that they won't be able to sell the products they ordered.

Though there's been a lot of "cautious optimism" regarding how consumers already hit hard by a downturned economy will respond when the holiday sales season really gets in gear, retailers now have a better idea of what to expect. The Consumer Electronics Association on Monday released its annual CE Holiday Purchase Patterns Study, and the news isn't great. The trade association expects just 3.5 percent growth in electronics shipments during the final quarter of the year compared with last year. It's so low that as Jim Barry, a CEA spokesman, said, "Any increase is a good thing."

And though when consumers were asked what items were on their wish lists for the holidays, 4 of the top 10 were CE devices like TVs, cell phones, and video game consoles. While that's encouraging for the industry, consumers are still tightening their gift budgets this year. Respondents to the CEA survey plan to spend $1,437 this holiday, which includes gifts, food, and decorations. But more importantly, it's $200 less than what consumers reported they would spend last year. That means something is getting cut out this year, and it's probably not food.

That could explain the great deal Martinez was able to find even before the traditional holiday shopping season. She'd seen the LCD TV model she wanted in Costco for $1,399, and the closest one she could find at Best Buy was $1,799. Armed with a photo of the price tag of the set seen at Costco, she asked a Best Buy salesman if he could match the price.

"He said, 'Since (ours is) a newer model, we can come down to $1,499 for you,'" Martinez recounted to CNET News. After consulting with her more tech-savvy brother, she told the Best Buy salesman she'd have to think about it since the price was still more than she expected to spend.

Clearly not wanting to lose the sale, the salesman decided to sweeten the deal. He threw in 20 percent, then 50 percent, off her accessories like an HDMI cable and surge protector. When Martinez still wasn't convinced, they went back and forth a few times before he added a Blu-ray Disc player--discounted from $399 to $199--and three Blu-ray movies.

The pressure to move products like TVs and Blu-ray players right now is only the latest sign that this holiday is not going to be particularly healthy. We've seen the signs coming since earlier this year, and retailers have been understandably nervous coming into the fall and winter. Those springtime stimulus checks from the government weren't just for fun--the retail economy has been sluggish for some time now.

"As we've gone through the summer, even up to Labor Day, back-to-school was relatively slow. (Retailers) made decisions that demand was likely to be reduced this holiday. A lot of retailers weren't as willing to stock up," said Steve Baker, an NPD Group analyst who follows consumer electronics retail.

The decisions for the TVs, PCs, cell phones, and GPS devices we see on shelves in November and December are made between February and March. Retailers decide on what products they want, and gauge which sizes, features, and colors they want to push. For Black Friday pricing specials (the day after Thanksgiving) those decisions must be communicated to vendors by July in order to ensure the correct number of volumes can be produced in time.

But this year, with so much uncertainty, retailers have been waiting until "the last possible moment" to place their orders, according to Steven Cook, vice president of strategy for Samsung.

Inventory just sitting on shelves is a concern for retailers because they don't want to get caught with an excess of gadgets, and some may prefer to set up contingency plans instead.

Rather than ordering a bunch of TVs up front, for instance, vendors can be conservative about how many they take, and strike an agreement with specific brands ahead of time to supply smaller, emergency volumes of their TVs later, if it appears that they're selling better than they thought.

According to Baker, "They're thinking 'I'd rather run out than have a ton leftover.'"

This could work out well for consumers. If you're being conservative with your budget like many people have said they will be--and retailers are clearly aware of this--they know that on certain products no matter how much they lower the price, that's not necessarily going to get you in the door.

For that reason, trying to wait out retailers on their prices by buying as late as possible--as we've seen for the past few holiday seasons--isn't a sure bet. Because they'd rather have too few TVs than too many, there will still be good deals to be had, as Martinez' Best Buy experience shows, but it looks to be earlier this year than usual.