Two Camps -- PC and CE Vendors -- Compete for Dominance in Home Entertainment Technology, Says ABI.

Business Editors/High-Tech Writers

OYSTER BAY, N.Y.--(BUSINESS WIRE)--Jan. 6, 2004

PC vendors have been aggressively entering the consumer electronics (CE) market, attracted by the huge profit margins of high-end CE products. This insurmountable task will not be easy, and PC manufacturers' present strategies will not afford them the opportunity to wrest a major share of revenue away from the incumbent CE leaders in the near future, according to technology research firm ABI.

For the most part, PC manufacturers are joining the CE herd because the PC industry is now commoditized -- there are too many vendors offering similar products resulting in severe pricing pressure. Due to this downward momentum, profit margins for the manufacturers have dwindled in recent years.

Another motive for PC vendors' move into CE devices is convergence. Digital convergence between CE products and PC-based products is a natural, logical confluence of the technologies. Leading PC software and hardware companies, such as Dell, Microsoft, Intel, HP and Gateway, would prefer to seize control of the redefined CE landscape. According to Vamsi Sistla, Director of Broadband Research at ABI, "computing power, residential broadband access, and home networking are the three catalysts that are driving this convergence. Responding to the threat from PC vendors, many of the leading CE vendors, including Panasonic, Sony, Philips and Sharp, are arming their 'traditional' CE products with computing, broadband and networking capabilities."

Leading PC vendors seek to tap the additional growth afforded by the broader, and larger, CE market. Through initial successes with digital cameras and camcorders, PC vendors have already successfully entered the low-end market. Conversely, the high-end markets for PC manufacturers would require selling digital TVs and video host devices, such as PVRs (personal video recorders), and later progressing to HD (high-definition) products. Entering the high-end CE market increases vendors' reliance on Asian ODMs.

"High, sustainable profit margins with high-end CE products might not be possible, however, as more and more vendors enter the market, potentially repeating the PC industry's present situation," continues Sistla. "In the end, continued product differentiation -- combined with meeting consumers' needs -- will be a path to success for either camp."

ABI's Residential Entertainment Technologies Quarterly Service (RETS) offers the latest market forecasts for different display technologies including liquid crystal display (LCD), plasma and digital light projector (DLP), as well as for other digital devices such as DVD players/recorders, digital audio products, personal video recorders (PVR), game consoles, and wireless and network-enabled digital products. RETS provides detailed market segmentation coupled with insightful analysis, and clients are given quarterly updates of the latest trends, news, and vendor announcements.

ABI is a N.Y.-based technology market research firm founded in 1990. ABI publishes market research and technology intelligence on the wireless, automotive, electronics, broadband and energy industries. Details can be found on the web at abiresearch.com or by calling 516-624-3113.