PCs Are Passe at the Consumer Electronics Show


By Stephen H. Wildstrom Once upon a time, the Consumer Electronics Show was about televisions and stereos. Slowly, computer technology crept into the annual January appliancefest until it had become similar to the industry's fall Comdex show, except for the car-stereo systems and cell phones.

This year, a strange thing has happened to CES. The Las Vegas Convention Center is stuffed with high-tech products -- and acres of macho auto sound systems -- but hardly a personal computer is in sight. Fact is, PCs have become pretty boring. This year offers nothing dramatically new in either hardware or software, but there's an explosion of handheld computers, Web-browsing tablets, wireless devices, and Internet appliances of all types.

MARKET SATURATION. Furthermore, PC-sales growth has slowed dramatically, and that's not just the function of a cooling economy. There's general agreement that the market, especially in the U.S., is largely saturated. And computers are far more powerful than most of today's software demands, so replacement cycles are growing longer. The result: Future growth will be much slower than it has been over the past several years.

This new reality is forcing some important changes on the major PC players. Intel may be the most dramatic case. Since its main business has been selling microprocessors to computer makers, the company has never been a major exhibitor at CES, which is attended largely by electronics retailers.

This year, Intel has an enormous display in the middle of the show floor. The reason: It's branching out with a rapidly growing line of consumer products. It introduced a digital-music player at the show and, in coming months, will ship Web tablets and inexpensive personal-communications devices, including one aimed directly at the instant-messaging market for teenagers.

GENERATING DEMAND. That's not to say Intel is giving up on PCs. Indeed, all of its appliance-like products require PCs in one way or another to operate. Instead, the company hopes to take what has become one of the best-known brands in the world -- brought to prominence largely through its very successful "Intel Inside" marketing campaign -- and extend it to a whole range of new products. The new Intel lines are also designed to generate internal demand for some of the company's non-Pentium technologies, including flash memory chips and its power-conserving StrongARM line of processors.

Microsoft is taking a similar tack. Its big news is the Xbox, a high-powered gaming system the company hopes to have on retail shelves in time for next fall's big buying season (the following Christmas is always the dominant concern at CES). Microsoft is also pushing MSN Companions, such as the Compaq iPAQ Home Internet Appliance, and pocket PCs, such as the Hewlett-Packard Jornada 540, which run on variations of Windows CE software.

Even the stodgy 3Com is striving to become a consumer-products player. The company, which established itself in the enterprise-networking business, is trying to remake itself as the seller of the Ergo Audrey Internet appliance and Kerbango, a clever device that plays both conventional broadcast radio and the thousands of stations that send "radio" content out over the Internet. But unlike Microsoft and Intel, 3Com doesn't have a well-established consumer brand. In fact, it lost its best-known brand names when it spun off its Palm and U.S. Robotics operations.

In today's tech market, however, many companies seem to feel it's either win the consumer or die. It's a tough transition -- selling at retail is a complex and difficult business -- but one companies may have to make if they want to continue growing. Wildstrom is Technology & You columnist for Business Week


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