Even with the war news and the funky economy, there was enough stuff to turn on the Retailers and enough Retailers to turn on the Vendors. We met some new companies and did some follow-up with players who were at the most recent RetailVisionâ and have a lot to report on how it’s going in the trenches.

I sat with the new force in the security market. Red Cannon. These guys are about to try to out-sling McAfee and Symantec in the firewall arena with Fireball Cyber Protection. From the looks of it, they have some big guns, and some great technology. The product is ready for prime time. A bunch of renegades from ISS/Network ICE, these guys have one heck of a channel team, including longtime industry consultant and our old buddy Bruce Koenigsberg helping to bring them to market, a great channel program including pre-budgeted MDF, a “rolling thunder” PR campaign to stir up lots of interest, top notch GUI design, and lots of very heavy-duty industrial-strength firewall stuff under the hood. It’s an enterprise product with a consumer front-end. Nice.

Wynit was also there, and old acquaintance Geoffrey Lewis CEO was reaching out to the retail side of the house to make some impact. Wynit is a smaller distributor, but very focused. These guys know everything about video….everything! They are looking for some retail lines and retail partnerships. Just can’t figure out why they had those guys in superhero costumes hanging around. That was an odd one…

Wynit likes to sell complete solutions into retail. They had one on display for the office supply guys, and the rest of the channel too. Fargo is a long time manufacturer with a new product. Using technology licensed from HP, Fargo has this very cool system for generating permanent badges with pictures. Proprietary badge blanks, proprietary ink cartridges, cool camera and printer. Sound like razors and blades to you? Yeah, me too. I like it.

Longtime readers know that I like to pick out funny names at every show. Well this year’s show had CokeM. I asked about the history of the name, and it sure sounded like double-talk to me. CokeM is a close out and licensing outfit with over 700 products (hey, that’s what the guy said, I only report ‘em), and specialized in bundle deals. They call themselves a Value Added Marketer. That sounded like spin to me. Longtime Navarre guy Chuck Bond is President, and I guess they’re doing something right, as he was named “Entrepreneur of the Year,” last year by Entrepreneur Magazine. That’s a pretty cool thing.

Hey, how many people did J&R send to this show? I know New York is the greatest city; so great they had to name it twice: New York, New York. Besides Steve Giblin, Jack Warman (spelled Wahrman?), and Michael Eid, who else works there? Did they send the whole floor?

I also like to pick one very neat thing from every show. A couple of years ago it was Imation’s mini-CD. Boy I thought that one had legs. Apparently I was wrong. This year, I know I’m right. When you see this stuff you’ll know it too. ZIPLINQ is introducing some incredible stuff for road warriors in a brand new mobile category: all sorts of retractable stuff for your briefcase. How would you like to go on the road without a cell phone charger? These guys have a USB piece with a retractable self-spooling cord about the size of a pen that charges your cell from your laptop’s USB port. That piece saves me at least half a pound on the road. How cool is that? And if you don’t think that’s great, then you ain’t no road warrior. They are launching with 13 SKUs. I like this one. No fly-by-nighters either, the parent company is Cables Unlimited, 10 years in the channels. Guided to our channel by longtime industry good guy Tom Chase, formerly of communication gear outfit Hawking Technology. Big reaction from regional and national distys?, lots of Retailers.

Will John Hartsock from Zones ever stop giving me a hard time because I work out of my house? I think he’s jealous of the furry slippers I wear to work every damn day. And what the heck happened to Saeed Ghaemi formerly of Zones? He claims he broke his ankle on some stairs…but those of us in the know believe he messed it up on the golf course….

Okay, here’s a good one: Symbol Technologies. Lots of us have seen the inventory-takers in the stores with handheld devices from Symbol, a well-established public company with a huge track record in handheld vertical-market devices. Symbol is the king of handhelds. Their stuff is non-denominational, supporting Palm and Pocket devices. Symbol is making its first foray into shrink-wrapped product with a very cool software piece for the SMB market. Price checking, wireless support, inventory management, even field estimating. Now available for the rest of us.

Follow-up chat with the folks from Maxell. Last time they were launching their entire line into retail, leveraging the Maxell brand with DVD. Talk about a nice combo. Full branded supply solutions for everything from digital cameras, vidcams, media, batteries, etc. And they’re big enough, with a dominant enough market share to pull a Campbell’s approach…..”Soup is Good Food”….only Campbell’s is dominant enough to support the entire category by building the category positively. Maxell is dominant enough to push DVD hard and profit from the spillover into their brand. When I had a 92% market share with QuickCams in 1996-1997, I beat that drum pretty hard myself for Connectix. Anyway, back to Maxell, who runs a training center for Retailers and merchandisers. By the way, no requirements or buy-in to attend, they tell me. That’s how you build a category. My hat’s off to Maxell.

Netgear is pretty strong in the 802.11 market (one of my faves). They’ve added some interesting SKUs; Powerline Adapters to plug in to your power plug and transmit over the house’s own power network, which solves the problem of “gray areas” in your oversized house that we all own these days. By the way, did you know the average American house is about 20% bigger than 10 years ago? This is a good solution. They also are introducing a ton of bridge products using Ethernet….no drivers. Sounds like a good idea. Netgear still has the #1 4-port wireless piece.

Had the most pleasant chat with Steve Cason from Ingram. One of the true class acts in this business. Boy, Dave Nalley has sure put together a world-class crew over there. I guess you can do that when you have $20 Billion in annual revenue. $20 Billion!!

And one final product idea….the guys at Pricegrabber were selling a new concept to Vendors and Resellers. Pricegrabber is mining the tons of data gathered when 9 million customers use you for a pricing guide. Then they take the data and do a first-pass category and/or product analysis, delivering you the Vendor (or Reseller) info you need to price, reprice, market, and/or analyze what the heck is going on in your target markets. Really impressive interface.

A few years ago, RetailVision introduced PowerViews, Retailer presentations, to RetailVision University. Man, when the sessions are good, they’re great. Kevin Jones, VP of Merchandising at Micro Center did a great stand-up presentation. He clued in the Vendor audience (at least 50 strong) on the ins and outs of working with this key Reseller. Did you know that Consumer Reports calls Micro Center one of the top 2 Retailers?! (the other one is Circuit City). Kevin shared some stuff that I’d never heard before, but I can’t share it here…off the record you know. I can say that they have sharpened their focus on their key demographic…tech-savvy, early adopter, educated. Micro Center goes after folks with money to spend on this stuff. Even so, they are seeing lots more peripheral and add-on sales, like everyone, and fewer system sales. Looks to me like the Retailers are doing the same numbers with a lot more deals. Wonder what impact this has on operating expenses etc? Oh, well, anyway Kevin took the time to really go deep with the Vendors on how to make an impact at MC. He spent a good deal of time advising the Vendors how they can help MC and how MC can help them. MC had a lot of people here; Kevin’s boss Tom Fritz, Greg Leser, Jeff Morris, and longtime Mac guy Jack McPeek (who broadened out into hardware, I think). It’s a great team at Micro Center and we continue to be impressed.

Finally, whose idea was it to go to Chicago in March? Okay, we got that off our chest. Honestly, what a great hotel for an event! The Sheraton in downtown Chicago does a really nice job. This show was smooth, congenial, and a real pleasure. Event Director, Pete Prentice and his whole team pulled off a great show. Oh yeah, and the party was a scream. After doing a comedy show for us, Jon Lovitz, Victoria Jackson, and the very funny Kevin Nealon (all stars of Saturday Night Live) were the host-presenters for the awards. Cracked everybody up. Well worth the price of admission. That’s about all for me. Had a great time. You know how I always pick a worst product from every show? There wasn’t one. RV this time was a serious, but fun, show for serious times. Except for that girl in the platinum wig. She was supposed to look like Einstein. Still can’t figure that one out. Please, someone, throw me a bone? Buy me a clue?

Steve Cross is Director of Channel Sales for iVAST, Inc., the world leader in end-to-end MPEG4 solutions. scross@ivast.com 702-492-7472

NEWS

Leading Retailers Honor Vendors of Consumer Technology at RetailVision Spring 2003 Event

Bedford, NH, April 7, 2003 — North America's leading retailers recognized vendors for their technology innovation and channel strategies at the "Best of RetailVision Awards" held during the RetailVision Spring 2003 Event, March 25-28 at the Sheraton Chicago Hotel and Towers in Chicago, Illinois. For the past 13 years, the "Best of RetailVision Awards" have been acknowledged as one of the computer retailing industry's leading honors. RetailVision is produced by Vision Events.

"Being recognized by the industry's most powerful retail decision makers is a tremendous honor for all of the winners and nominees. These awards bring with them much prestige because they’re voted on by the leading retailers in North America," said Pete Prentice, event director for RetailVision.

RetailVision Spring had more than 160 vendor companies showcasing new products this year.

The winners of the latest "Best of RetailVision Awards" are as follows:

• Best Product: Hardware — Palm
• Best Product: Productivity Software – ACCPAC
• Best Product: Peripheral — Logitech
• Best Product: Accessories — American Power Conversion (APC)
• Best Product: Edutainment/ Entertainment Software — MUSICMATCH
• Best Merchandising — Belkin
• Best RetailVision Presentation — Maxell
• Best Retail Strategy — Palm
• Best New Technology — Logitech
• Best Vendor — Palm

For further information on the "Best of RetailVision Awards," please contact Melissa Park at 603-471-4226, John Hurley at 603-471-4228 or visit the Web site at www.retailvision.com.

1. The strong get stronger…what to do in a recession ..hide or attack. Cisco Systems, Inc., today announced a definitive agreement to acquire the business of privately held The Linksys Group, Inc. of Irvine, CA. “Linksys has captured a strong position in this growing market by developing an extensive, easy-to-use product line for the home and small office," said John Chambers, President and CEO of Cisco Systems. "This acquisition is a solid example of Cisco's strategy to broaden its end-to-end portfolio of network solutions into high-growth markets such as wireless, voice-over-IP and storage area networking. This acquisition represents Cisco's entry into the high-growth consumer/SOHO networking market, which is expected to grow from $3.7 billion in 2002 to $7.5 billion in 2006 worldwide (sources: compiled from Dell'Oro Group, Synergy). Home networks allow consumers to share broadband Internet connections, files, printers, digital music, photos, and gaming, all over a wired or wireless LAN (local area network). Under the terms of the agreement, Cisco will issue common stock with an aggregate value of approximately $500 million to acquire the Linksys business and to assume all outstanding employee stock options. The acquisition of Linksys is expected to close in the fourth quarter of Cisco's fiscal year 2003. Cisco expects the acquisition of Linksys to be dilutive by no more than $.01 to its FY2004 GAAP EPS. Exclusive of acquisition charges, Cisco anticipates this transaction will add approximately $0.01 to its FY2004 pro-forma EPS. The transaction will be accretive to both GAAP and pro-forma earnings thereafter.

2. Forget Japan, Korea is taking over..Samsung Electronics Co., Ltd., the world's largest provider of TFT-LCD display panels, today announced that it has recorded its fifth year as the world's foremost maker of TFT-LCDs. According market researcher, DisplaySearch, Samsung sold US$3.086 billion worth of TFT-LCDs in 2002 to capture 17.6% of the world market--the top share in terms of sales revenue. By geographical region, the worldwide TFT-LCD production breaks down as 38% for Korea, 36% for Taiwan and 26.9% for Japan. Thus, Taiwan has surpassed Japan for the first time to rank second, while Korea has remained the top TFT-LCD producing country since 1999. The top 4 company rankings are Samsung (Korea, 17.6%), LG-Philips LCD (Korea, 17.4%), AU Optronics (Taiwan, 11.7%) and Sharp (Japan, 9.1%). Samsung has achieved the highest share of the world market in 1998, just four years after starting up TFT-LCD production. Samsung's record performance in the TFT-LCD market comes from its well-facilitated marketing strategy of large-area notebook panels. The 15-, 17- and 19-inch models have received good response from the market. Samsung started up its 5th-generation fabrication line (1,100mm by 1,250mm substrates) in Cheonan, Korea in September 2002. Construction of a sixth fabrication line was initiated last December and is scheduled for completion in the third quarter of 2003. Samsung will secure a monthly output of 160,000 substrates from lines five and six. The enhanced capacity will meet growing market demand for 20-, 22- wide-screen, and 32-inch LCD TVs along with forecasts for another strong year of 15-inch notebook PC panels and 19-inch TFT-LCD monitor models.

3. Who’s winning the battle for interactive entertainment room? Well, I would say Sony. Sony Computer Entertainment America sold 5 million PlayStation video game consoles in 2002, a 25 percent increase over sales for 2001. More than 4 million of these were sold during November and December 2002, accounting for $2 billion in revenue and representing a 46 percent increase over 2001 PlayStation 2 holiday sales. As of November 2002, 45 million PlayStation 2 games had been sold worldwide, according to data from NPDFunworld. Sony also said that sales of its Network Adapter, which enables online gaming for PlayStation 2, reached 400,000 units as of Dec. 30, nearly doubling Microsoft's reported sales of 250,000 Xbox Live kits.

4. Diversification, Partnerships to help improve profit! That’s a trend that we will see accelerate. Consider this: Best Buy reported fiscal fourth-quarter earnings from continuing operations of $378 million, or $1.16 a share, versus earnings of $1.04 a share in the year-earlier period, and above the average analyst estimate compiled by Thomson First Call of $1.13 a share. For the quarter ending May, the consumer electronics Retailer expects same-store sales to decline in the "low single digits" percentage range due to geo-political concerns and the uncertain consumer environment.

5. To bolster its sluggish business, Best Buy and LG Electronics are teaming up to offer consumers high-quality and high-tech appliances. Beginning in May, Best Buy will be the first national Retailer in the U.S. to carry LG refrigerators and laundry pairs, many of which will be exclusive products to Best Buy. An existing line of microwaves also will be added to the product category. The assortment will be available to customers nationwide in more than 500 Best Buy stores. "This is a great opportunity for our customers - more selection and more choice," said Mark Overgard Senior Vice President of Home Essentials for Best Buy. "We continue to diversify our product offerings and strive to provide customers with unique appliances at great prices. "We are truly excited about this new partnership between LG and Best Buy, bringing to life a new consumer demographic for our company," said Simon Kang, President, Home Appliance Division, LG Electronics U.S.A., Inc. "Best Buy recognizes our mutual strengths in providing high-performance, top design and technology-advanced products to consumers. The new partnership allows us to expand our customer base, while better serving the overall public." Currently, out of 104 Future Shop locations in Canada, 99 carry LG Electronics' major appliances (washer, dryers, refrigerators, freezers) and 102 carry some form of LG appliances (microwaves or vacuums).

Similarly, America Online, Inc., the world's leading interactive services company, today announced a new relationship with Best Buy, to provide in-store promotion of the AOL and AOL(R) for Broadband services in more than 500 Best Buy stores across the United States. In a separate agreement, Best Buy's wide selection of consumer products are now available in several key areas across the AOL service. Under a new agreement, the AOL and AOL(R) for Broadband services will be featured in Best Buy stores nationwide, allowing Best Buy to offer consumers everything they need for home connectivity, including access to AOL and the Internet at whatever speed they prefer. Special displays will provide information about AOL's selection of online services, and store employees will be trained to help consumers sign up for AOL .In addition, a separate agreement brings BestBuy.com's broad selection of consumer products to commerce areas across AOL, including a variety of Shop@AOL's most popular areas such as Computing, Electronics and Entertainment. The promotions will be relevant to the products they accompany, as part of AOL's "commerce in context" approach to online shopping, and consumers are able to make purchases directly from BestBuy.com simply and securely. "Best Buy's leadership in consumer electronics and connecting consumers to digital life solutions, combined with AOL's strength in interactive services, widens our ability to help consumers integrate the power and promise of the online experience at any speed," said Mike London, Executive Vice President and General Merchandise Manager for Best Buy. "Working with America Online, we will provide real value and convenience to our customers, while bringing BestBuy.com's great selection of consumer products to AOL and AOL for Broadband members." Joe Redling, America Online's Chief Marketing Officer said, "Best Buy and AOL are brands that millions of Americans know and trust, and we are pleased to join in a new relationship with such a leader in retailing. We look forward to working with Best Buy to help consumers get on the Internet and make the transition to broadband. AOL is kicking our broadband marketing into high gear, and Best Buy is a fantastic partner to have in this effort and to help introduce new customers to the value we offer. "The in-store AOL for Broadband promotions are part of AOL's first-ever major marketing campaign for its broadband offering. The multi-faceted campaign includes a series of television ads that debuted during the recent Oscars ceremony broadcast, a 50-city Mobile Marketing Tour, and more. AOL for Broadband features a unique online experience created for broadband consumers by combining cutting-edge communications, unmatched community, and a broad range of exclusive content to put some of the world's best entertainment and information resources at their fingertips.

6. Shock and Dell. The direct marketing juggernaut that impacts retail sales on a daily basis just introduced four new printers for customers ranging from individual consumers to corporations, bringing a new level of value and convenience to those who purchase printers and associated ink and toner cartridges. The printers feature the Dell Ink Management System(tm) or Dell Toner Management System(tm), which simplify the purchasing process by displaying ink or toner levels on the status window during every print job and proactively prompting users to order replacement cartridges. When cartridges begin to get low, the status window will deliver a message alerting users that it is time to order a replacement cartridge from Dell. One click of a mouse leads to Dell's online imaging supply store (www.dell.com/supplies), which recognizes each user's printer model and offers the appropriate replacement ink or toner cartridge, greatly reducing the risk of buying the wrong cartridge. New cartridges can be delivered as quickly as the next business day. Along with the printer launch, Dell has established a program to recycle outdated printers at no additional charge for anyone who purchases a new Dell printer. This is the first offer of its kind among major electronics companies. Customers -- without ever having to leave their home or office -- can easily ship their older printers, regardless of the manufacturer, to approved recycling centers. Dell provides a pre-paid postage label and simple instructions to arrange for pick-up. "We plan to improve the customer experience of purchasing printers and replacement ink or toner by delivering the same value, attention to service and industry-leading products as Dell has over the past 18 years," said Tim Peters, Vice President and General Manager, Dell Imaging and Printing. "These four printers are just the first models in what will be a broad line of products that meet the needs of all customers, from individuals to large corporations". What’s next? Projectors for home and businesss users.

7. Koppel Steps Down as President of PC Connection and Chief Executive Officer Patricia Gallup will assume the title of President and CEO of the Corporation. Gallup is a co-founder of PC Connection, Inc. and has also served as Chairman and a member of the executive management team since the Company's inception in 1982. Koppel will continue to serve the Company as a project consultant. "We appreciate the contributions Ken has made since joining us eighteen months ago, and we wish him well," said Gallup. In addition to the executive management team, the Presidents of each of the Corporation's sales subsidiaries will also report to Gallup. This includes Bob Gregerson, President of PC Connection Sales Corporation, Gary Sorkin, President of GovConnection, Inc., and Russell Madris, President of MoreDirect, Inc. "Each of the organizations within the PC Connection family of companies have leaders who have been involved in the IT industry for more than twenty years collectively, giving us well over a century's worth of experience in the business," said Gallup. "In addition, all of us have demonstrated that we can successfully manage organizations through both downturns and booms. I strongly believe we are well positioned to selectively take advantage of the opportunities we will have as the health of the economy recovers." PC Connection also announced today, that in light of the uncertainty surrounding the conflict in Iraq, the Company believes that large customers have delayed purchasing information technology equipment. Accordingly, it is revising its earlier guidance. The Company expects its net sales for the first quarter of 2003 to be in the range of $280 million to $290 million. The Company also expects to report diluted earnings per share in the range of $.03 to $.06. Sales to small- and medium-sized business customers are expected to increase sequentially between 1% and 4% over the fourth quarter of 2002. Sales to government and education customers are expected to decrease sequentially by 30% to 35% from the fourth quarter of 2002, consistent with historical patterns. Sales to large account customers are expected to decrease sequentially by 20% to 25% from the fourth quarter of 2002, due to the delay in purchasing referred to above.

8. HP: Still Firing…. HP recently announced a new series of notebook PCs with DVD+R/+RW drives and four HP Pavilion desktop PCs with rewritable CD or DVD drives, all of which are ideal for enjoying digital music and editing photos or videos. The HP Pavilion ze5300 series notebook PCs with rewritable DVD drives provide users the power, connectivity and convenience demanded by today's multimedia applications in a full-functioned device that doubles as a mobile entertainment center when connected to compatible DVD players.

HP Pavilion desktops offer a full range of powerful, easy-to-use PCs packed with hardware and software tools to make digital entertainment capture and editing a snap. The new models include the first desktop PC with a DVD+RW drive priced under $900.

"The new HP Pavilion lineup offers customers the ability to capture, create and share digital video and pictures, enjoy music and play games in the home or on the go," said Sam Szteinbaum, Vice President and General Manager, North America Consumer Computing Organization, HP Personal Systems Group. "By utilizing DVD+R/+RW drives, we provide consumers a platform that has high compatibility with DVD players and DVD-ROMs to create an awesome multimedia experience."

The ze5300 series uses the DVD+R/+RW format, which is compatible with more DVD players tested than other formats and is the only DVD recordable format to support partial overwrite and still maintain compatibility. With the ze5300 series, consumers can use the menu screen from a digital video camera to record directly to a DVD or CD disc without having to edit movies first. And they can add digital still pictures to video to create a slide show -- and then record it on a DVD. In addition to the ability to edit, record and play DVDs, the Pavilion ze5300 series has a drive that can store up to 4.7 gigabytes of data on each disc. This equates to the storage capacity of up to seven CD-R/RW discs. The notebook series includes HP Memories Disc Creator and ArcSoft software that allow easy creation of slide shows, photo albums and archives of digital images for display on a PC with a CD player or a TV with a DVD player. Additionally, the ze5300 series offers three USB 2.0 ports (up to 40 times faster than USB 1.1), up to 80-GB hard drive, Sonic MyDVD suite for digital video editing (on models with an IEEE-1394 port) and MUSICMATCH Jukebox, a complete, personal music system. With a choice of powerful Intel(R) Pentium(R) 4 or Celeron(R) desktop processors and integrated ATI Mobility Radeon graphics controller with 4X AGP 3D performance, the HP Pavilion ze5300 provides desktop convenience and functionality in a stylish, mobile design.

Estimated U.S. pricing for the HP Pavilion ze5300 series notebook configured with a 2.66-GHz Intel Pentium 4 processor, 512-MB RAM, 40-GB hard drive, 802.11b integrated wireless, DVD+R/+RW optical drive and 15-inch SXGA+ display is $1,725 (after $100 rebate) without a floppy disc drive. DVD+R/+RW is currently available on configure-to-order HP Pavilion ze5300 series notebooks. The notebooks can be customized with a full range of options and purchased through the Web at http://www.hpshopping.com or by phone at +1 888 999 4747. The new lineup of HP Pavilion desktop PCs, loaded with features to make digital media quick and easy to enjoy, includes the HP Pavilion 505n, 515n, 725n and the 735n -- which features a rewritable DVD and CD combo drive for under $900. Ready to manage digital photography right out of the box, the HP Pavilion 505n desktop PC features an Intel Celeron 2.2-GHz processor to support daily computing tasks and make basic computing a breeze. The 505n also includes a 60-GB hard drive, 256-MB DDR (double data rate) memory, a 48x CD-RW drive and integrated Intel Extreme UMA graphics with up to 64-MB shared video memory. At an estimated U.S. street price of $519, the 505n is expected to be available in retail stores and on hpshopping.com beginning April 6. With an estimated U.S. street price of $599, the HP Pavilion 515n PC is ideal for viewing DVD movies and managing digital photography. The 515n includes an Intel Celeron 2.3-GHz processor, an 80-GB hard drive with ample storage for music, digital photography and data, 256-MB DDR memory, a 48x CD-RW drive for CD creation and playback, a 16x DVD-ROM for watching movies, and integrated Intel Extreme UMA graphics with up to 64-MB shared video memory. The HP Pavilion 515n is expected to be available in retail stores and on hpshopping.com beginning April 6.

9. CoolSavings Debuts 'Buy Anywhere' Strategy for Cross-Channel Retailers. Since the late 1990s, industry experts have been documenting a growing trend among consumers; they are using the Internet not just as a sales channel but as a resource to learn about products and services before purchasing them in an offline channel. A February 2003 report by the UCLA Center for Communication Policy, in fact, found that 71.9% of Internet shoppers sometimes or often look online for products and then purchase those products in retail stores. Media research company, Jupiter Research, recently affirmed the trend as well in predicting that the Internet will influence 30% of all offline retail purchasing by 2007. In response to this shift in consumer behavior, CoolSavings, a leading online direct marketing and media company, has introduced Buy Anywhere, a new marketing platform designed specifically for cross-channel Retailers to cater to today's multi-channel shopper. Through the Buy Anywhere program, participating advertisers will target CoolSavings' 25-million registered households with special promotional offers that can be redeemed at any of the Retailer's various sales channels. Each offer--which may be delivered through any combination of the coolsavings.com Web site, online newsletters, targeted e-mail, direct mail or the Internet-wide CoolSavings Marketing Network--will include pertinent information to enable the consumer to easily redeem the promotion, including store locations, a Web site link, or an 800-number to make a purchase or request a catalog. In addition, the offers will be singled out to consumers through a colorful Buy Anywhere logo, which designates that shoppers have the ability to take advantage of the promotion at the retail channel of their choice, such as a physical store, Web site, catalog or call center. "Buy Anywhere is really about recognizing and gearing your marketing strategy to today's consumers’ shopping habits," commented Mathew Moog, President and CEO of CoolSavings. "It's one point of contact with the consumer to encourage multiple points of purchase through your company, creating a 'win-win' for shoppers seeking more choice and convenience and Retailers seeking more sales."

NEWS

NPDTechworld Information Technology Industry Overview – Distribution February 03

Distribution revenue fell year-on-year for the third time in the last four months as sales were hit by falling prices in some key growth categories and an on-going mix shift into lower value categories. February total revenue was just over $1.4 billion, more than 11% behind 2002 number and off 10% sequentially from January 2003, slightly worse than the February 2002 6% sequential fall-off. Falling prices in key categories like LCD Projectors, CD and DVD recordable drives, multi-function printers and notebook computers served to mute the revenue gains that might have accrued as a result of the 4% increase in total units sold. Unit volume growth was concentrated in two broad swaths of categories: communication products and consumables. Both of these categories generate significantly lower average prices than the overall category mix and their unit growth enabled them to gain unit and dollar volume share during the month.

Key Highlights

Desktop volume continues to plummet, falling by nearly one-half from the prior year and by a seasonally typical 10% sequentially. With ASPs at all-time lows, February’s average price was barely $900, desktops are becoming an increasingly small part of the sales mix. The steep drop from January could be an indication of price-cutting or of liquidation pricing, either way, the need to drop into price levels not seen before indicates that the desktop market is deeply wounded and any revival of demand is likely to very tempered.

Notebooks remained a bright spot in the distribution channel, as they are throughout the IT world. Unit volume is poised to pass desktops, while revenue is already consistently exceeding it. Notebook pricing was flat sequentially with January, although at below $1700, it remains at historic lows.

Server volume, while weak, remains consistent. While ASPs continue to fall on a year-over-year basis they have flattened out sequentially, raising hope that revenue can turn positive later in the year even if sales volume rises only minimally from today’s levels. Regardless, this category, like desktops, continues to lose its all-encompassing importance to distribution as sales volumes expand out into new product types and the go-to-market distribution strategies of the major PC makers emphasize a variety of methods to reach the customer.

PDAs weakness is apparent in distribution as it is throughout IT. ASPs jumped back to more reasonable levels of $245 in February from January’s low of $217. Volumes continue to fall precipitously as the PDA market shifts toward more low-priced products and combo phone/wireless devices that are less prone to be moved through distribution. The stable pricing indicates that distribution is moving toward more specialized distribution of PDAs to more corporate facing entities and away from mass distribution of low-price devices.

Inkjet printers in distribution are reacting much like in end-user markets. Pricing rose for the fourth straight month. While increasing prices are good news the unit volume declines are still more than sufficient to offset the increased value of the goods shipped. As products sold move away from bundled printers and toward both photo printers and business class inkjets, it is possible that dollar volume may eventually return to positive territory. As yet, the trends do not indicate that this eventuality is likely to happen in the near term.

One of distributions new key categories, laser printers represent a category where distribution has been able to add value, in addition to its ability to target the key classes of resellers who can make these products available. Pricing remains at levels that can support the value add of distribution while customer demand for color lasers and mid-priced black and whites have helped drive volume and ASPs up.

MFDs, while not nearly as important to overall distribution revenue as laser printers, represent an important new opportunity for distributors. Sales here are, in many cases, replacing scanner and inkjet sales. In addition, the product paradigm for MFDs supports business class products and higher pricing than the traditional consumer market pricing for inkjets. While inkjets are the majority of sales currently, trends indicate that MFDs will pass inkjets in unit and dollar volume sometime in 2003.

The future of distribution is, in many ways, evident in its ability to drive volume through consumable categories like this. The overall IT market morphs into one that places equal value on the aftermarket assets as well as the hard goods that drive the initial sale. As volumes grow in this category, it gains share (and importance) within the overall distribution hierarchy.

While this is a category that is still ramping up in consumer markets, its presence in distribution and commercial remains limited. Low profitability, low retails, a wide variety of distribution choices and lack of demand from end-users to source these products through the traditional reseller served by IT distributors will keep this category at low levels through these channels.

Sales for memory cards exploded in February, continuing on the path of red-hot sales growth. Pricing remains flat, both sequentially and year-over-year, as the classic tech pricing curve stays in evidence in the category. The market for all types of flash memory continues to expand and products like USB flash are likely to be increasingly important to commercial markets and help drive further distribution growth in the category.

Data cartridge volume was soft again in February as pricing and unit volume continued to be soft. If distribution is to maintain a place in media distribution, it will maintain its presence in the segment through this key category. As the largest and most established of all the storage media categories in distribution, any signs of a slowdown should be watched carefully to be certain that the reason behind the decline is associated with category specific issues versus a move away from distribution.

Monitor pricing has stayed very consistent over the past months despite the fall in volume, however, it has not exhibited any growth as has occurred in other channels. As CRTs are replaced by LCDs, the sales mix shift has driven ASPs higher in other channels. A lack of ability to generate positive ASP growth through distribution could mean that revenue will continue to fall in the segment. This would indicate that distributors are unable to capture higher share of LCD sales and are being relegated to sales in the weak CRT market.

LCD projectors saw a significant year on year price decline in February that drove revenue negative, even though sales volume jumped by nearly a third. Pricing fell to below $2000 for the first time spurring this poor outcome. This category had begun to take a place as an important positive revenue generator and an acceleration of price declines that put that into jeopardy would not be positive.

The scanner market, while serving totally different buyers and constituencies through distribution as in consumer, exhibits the same schizophrenic type behavior in both. Plunging unit volume has normally been offset by ASP growth but once again in February, despite a jump in pricing of over 25% to nearly $400, revenue growth was not covered by increasing ASPs.

Networking devices, the largest category of products sold by distributors, represented 19.5% of sales in February. After a slow January for unit sales, volume bounced back into positive territory. Yet, the February revenue decline was much worse than January as pricing fell significantly, both year-over-year and sequentially. Sequential pricing fell 9.5% to $232 as pricing fell in most sub-categories.

Hard drive pricing remained weak, as it has for a number of months, falling below $200 per drive. Declining revenue in this segment, which remains the third largest individual segment, is a critical factor in driving overall distribution revenue negative. For the distribution channel to turn positive, it is critically important to move volume and revenue in right direction.

The February decline in the recordable optical drive category was much worse in this month than last. Pricing, while far off last year’s levels, has stabilized in the mid $130 level over the past few months. The better corporate mix of products, such as drives for notebooks, as well as a lack of exposure to the plummeting prices in the consumer channel, has kept pricing relatively high through distribution. At these pricing levels if a stabilized demand picture should emerge by mid-year, the category should turn positive in revenue growth.

(This data is preliminary data and may change when final reports are issued. All comparisons below are made to year ago same month numbers unless otherwise noted.)

By Stephen Baker
Director, Industry Analysis NPD Group
Stephen_Baker@npd.com

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RESEARCH

The Battle Brewing in (Note) Books
By ChannelMedia Staff

The notebook computer market could be poised for some of the biggest changes in its history. With Intel touting the Centrino platform, Advanced Micro Devices pushing a range of new chips and its 64-bit offerings looming and Transmeta showing its cards prior to its return to the fray, developers and ultimately customers will have unprecedented options. Leading off is Intel, which released its Centrino platform, one that combines a low powered processor with wireless capabilities. The company debuted its first generation of the technology in early March and received support from a number of the leading notebook manufacturers, including Dell, IBM and Hewlett-Packard. There are a total of six chips in the initial lineup ranging starting at 1.6GHz, 1.5GHz, 1.4GHz and 1.3GHz. A low-voltage version will be available at 1.1GHz and an ultralow voltage one at 900MHz. The Centrino platform is an all or nothing deal for developers, they have to use the software and all of the hardware that Intel offers to be able to use the logo and get the advertising dollars, and there are a lot of dollars behind this push, the biggest from Intel since the original Pentium. The company plans on spending $300M in advertising alone. AMD, without the marketing push, or market share for that matter, of Intel, is taking a different road in this market. Instead of providing an entire take it or leave it solution, the company makes the claim that it is leaving the door open so that developers can use any combination of technologies to get wireless, rather than a one size fits all. Hand in hand with this effort was the release of 12 new processors for the notebook market. In the thin-and-light market, AMD is debuting its first chips ever, starting with the low-voltage mobile Athlon XP-M processors 1800+, 1700+, 1600+, 1500+ and 1400+. This represents the company's first concentrated effort in a market segment that it has long conceded to Intel. For full-sized notebooks, the company has released the Athlon XP-M processors 2600+, 2500+, 2400+, 2200+ and 2000+. In the Fall AMD will strike again, if all goes well, with a 64-bit chip for the notebook market. This has the potential to hurt Intel, if not in sales at least in prestige, since Intel will not have a 64-bit chip for this market for several years. So of course Intel is saying that no one needs 64-bit on the desktop or notebook, and it could be right since there is no real OS support and no need currently for that kind of horsepower to push current applications. But bragging rights are bragging rights. Gamely following the pack is Transmeta, which has released the details of the TM8000, formerly code-named Astro. Capable of processing eight instructions per clock cycle, it can handle more work per cycle than other chips. The chip also has new code-morphing software and power management technologies, and Transmeta has added three high-speed bus interfaces: 400MHz HyperTransport, an embedded DDR-400 SDRAM interface and an on-chip AGP-4X interface. These interfaces should eliminate some performance bottlenecks. The chips are slated for release in the third quarter. The company has started to gain traction with manufacturers recently and has deals with Hewlett-Packard, Sony and others and is making inroads in the smartpad market.

While it will take time for all of these systems to reach the market, there looks to be truly differentiating technology or business models, from all three chip developers and this should translate into more consumer choices.

RESEARCH

Sales Trends in Media
By Jon Peddie Research

No market can grow if it doesn’t have a strong and growing supplier base. The semiconductor market could never grow if there was a massive amount of raw silicon cores to process. Likewise, the DVD market cannot grow if there isn’t sufficient DVD media production. The DVD ROM production business seems to be in great shape with plenty of suppliers (most of them legal). According to figures compiled by Ernst & Young on behalf of the DVD Entertainment Group (DEG), more than 1.1 billion DVD movies and music videos have shipped since the format's inception in 1997. More than 18,000 titles are currently available with approximately 100 new DVD movies and music videos released each week. Companies like Taiyo Yuden are converting facilities currently making CD-Rs (recordable compact discs) to DVD-R production by the spring. Taiyo Yuden currently has the capacity to produce 60 million CD-Rs a month and plans to maintain that level even after the conversion through raising productivity. The firm initially planned to boost monthly production levels of DVD-R to 1.8 million discs by the end of fiscal 2002, but that number has now been raised to 4 million per month. For this report, we concentrated on the newest segment of media production, recordable DVDs. The quick summary is that DVD-RAM and DVD-RW Market are mainly in Japan for video recorders, and more DVD-RW/RAM media is and will be produced than DVD+RW.

The following chart illustrates this conclusion.

Figure 1. Recordable DVD media production and forecast

As the chart indicates, the DVD- media outstrips the DVD+ media. This data was collected from various sources including the production data from producers in Japan, Taiwan, Europe, and US: Avistor, CMC, Daxon (Acer), Dazon (Acer), Gigastorage, Lead Data, Matsushita, Maxell, MCC, MCC, Mitsui, Optodisc, Optodisc, Princo, Prodisc, PVC, Ricoh, RITEK, Taiyo Yuden, TDK, Vivastar, as well as market research firms Fujiwara-Rothchild, and Understanding and Solutions. However, there are indications that although DVD- media is going to have the largest production, the profitability of such production may be problematic. Some of the problem is from Asian companies stealing various manufacturer's recognition codes (stamped on the outer edge of the disc when you begin your write) and using them on their products to evade royalty payments. Some companies, like Pioneer, are leaving the disc market for DVD- production. Pioneer’s DVD-R/RW factory is being converted to PDP production.

HP (NYSE:HPQ) today introduced a full line of Compaq Presario PCs, including the newly designed Compaq Presario S3000 series desktops and the Compaq Presario 2500 and 2100 series notebooks with integrated 54g wireless LAN technology. The new notebooks provide higher data transfer speeds over longer distances than other wireless LAN technologies while providing backward compatibility to existing 802.11 standards, thus enabling mobile customers to significantly enhance their productivity from work, home or on the go. The redesigned Compaq Presario S3000 series desktop PCs feature high-capacity hard drives and DVD or rewritable CD drives at affordable prices -- making them perfect for work, school or play. "Our continued investment in the Compaq Presario brand -- including advanced wireless connectivity for Compaq Presario notebooks and digital recording capabilities in all Compaq Presario desktops -- reaffirms HP's commitment to providing consumers the latest technologies at great values," said Sam Szteinbaum, Vice President and General Manager, HP North America Consumer Computing. Designed to work with new wireless networks based on the draft 802.11g specification as well as existing 802.11b wireless networks, the Compaq Presario 2500 series notebook PCs let customers take advantage of speeds up to almost five times faster (54 Mbps) than current 802.11b wireless networks. Faster file sharing, a richer digital media experience or a more advanced head-to-head gaming experience are only a few of the benefits users can experience when operating in an 802.11g environment. This next-generation wireless technology is also more secure, supporting various security features including 128-bit WEP (wired equivalent privacy) encryption. Delivering desktop-class performance, the Compaq Presario 2500 notebook PC features fast Intel(R) Pentium(R) 4 processors up to 2.8 GHz. The notebook is an ideal portable system for the home and home office user that requires exceptional performance with its up to 15-inch high-resolution TFT display, ATI Mobility Radeon integrated graphics, IEEE 1394 input and wireless connectivity. The Compaq Presario 2100 series notebook PCs offer advantages customers need for work, school or home use with a high level of performance for productivity or digital entertainment purposes. Sporting a sleek, attractive design in two-tone graphite and silver, the mobile notebook is 1.5-inches thin and weighs as light as 6.7 pounds. The notebook includes up to a 15-inch display, ATI Mobility Radeon graphics and a full range of Intel Celeron(R) and Mobile Pentium 4-m processors. The notebook also offers double data rate (DDR) system memory configurations up to 1 GB and a Type I/II/III PC card slot that ensures expandability. Selected models also include an IEEE-1394 high-speed digital video port. Estimated U.S. pricing starts at $1,094 after $100 mail-in rebate for the Compaq Presario 2500 series with 54g and at $819 after $100 mail-in rebate for the Compaq Presario 2100 series with 54g. Both series can be customized with a full range of options. The products can be purchased through HP's "Built for You" kiosks located in participating Retailers, through the Web at http://www.hpshopping.com or by phone at +1 800 888 0220.
Compaq Presario S3000 Series Desktop PCs

The Compaq Presario S3000 series -- which includes the S3000NX, S3100NX, S3200NX and S3300NX -- features a sleek new design that makes these PCs a stylish addition to any home, home office or den.
The Compaq Presario S3000NX is an affordable PC that gives consumers the power and speed to enhance productivity, conveniently burn their own music CD collection or quickly and easily surf the Web. At an estimated street price of $449 after a $50 mail-in rebate, the Compaq Presario S3000NX features an AMD Athlon XP 2000+ processor to support daily computing tasks, 256-MB DDR memory, a 40-GB hard drive, a 48x CD-RW drive, 32-MB integrated graphics and an open AGP slot. The S3000NX desktop PC is expected to be available in retail stores and on hpshopping.com beginning April 6.

The perfect tool to handle everything from music and games to school work and the household budget, the Compaq Presario S3100NX features an AMD Athlon XP 2200+ processor, 256-MB DDR memory, 32-MB integrated graphics, an 80-GB hard drive, open AGP slot, a CD-RW/DVD-ROM combo drive for recording digital music, watching DVD movies or backup and storage of home office or creative projects. At an estimated U.S. street price of $539 after a $50 mail-in rebate, the S3100NX desktop PC is available today in retail stores and on hpshopping.com.

For consumers demanding a powerful machine and fast performance at a competitive price, the Compaq Presario S3200NX features an AMD Athlon XP 2400+ processor, 256-MB DDR memory, a 48x CD-RW drive, a 16x DVD-ROM drive, 32-MB integrated graphics and an open AGP slot. With a high-capacity 120-GB hard drive, this PC has ample room to download, create and save digital music, photo and video collections. At an estimated U.S. street price of $619 after a $50 mail-in rebate, the S3200NX desktop PC is now available in retail stores and on hpshopping.com.

With a 128-MB NVIDIA GeForce4 MX440 graphics card, the Compaq Presario S3300NX provides advanced graphics performance for complex gaming and home office projects. The system features an AMD Athlon XP 2600+ processor, 512-MB DDR memory, ample storage with a 120-GB hard drive, a 48x CD-RW drive and a 16x DVD-ROM drive to replicate data CDs or listen to music, watch favorite DVD movies and for data backup and additional storage. At an estimated U.S. street price of $769 after a $50 mail-in rebate, the S3300NX desktop PC is expected to be available in retail stores and on hpshopping.com beginning April 6.

All Compaq Presario S3000 series PCs include the Norton Anti-Virus software solution with 60 days of free updates to virus definitions, Microsoft(R) Windows(R) XP Home with Microsoft Works, a Compaq keyboard, a PS/2 scroller mouse, front- and rear-access USB 2.0 ports, a 10/100 Base-T LAN interface and a 56k V.90 modem.

Additionally, the Compaq Presario S3000 line features Compaq Instant Support, an Internet-based problem-solving tool that empowers consumers to quickly and easily solve many PC issues and obtain answers in real time. The Instant Support offering is based on technology from intelligent service software provider, Motive Communications, Inc.

HP's easy-to-access service and support for Compaq Presario PCs is available 24x7 via phone or online in English or Spanish. More information is available at http://www.hp.com/support.

RESEARCH

Rebates Propel Computer Hardware Categories
By Roger C. Lanctot, Director of advertising analysis, Beyen Corp.

Rebates accounted for half of all computer hardware advertised offers in 2002, virtually unchanged from 2001, but the mix of rebate-centric offers shifted to home networking products, notebook computers, input devices, computer monitors and audio and video cards. Meanwhile, the volume of advertised rebates for recordable media, desktop computers and CD-R drives declined.

Home networking products burst onto the scene in 2002 thanks to the emergence of wi-fi wireless networking technology and its acceptance by consumers. Rebates played a major role in their promotion to consumers at retail. Only computer monitors and palmtop computers saw more advertising volume in 2002, and rebates represented nearly a third of all offers for networking gear.

The widely reported decline in desktop computer sales was hardly a surprise in the context of a decline in advertising volume for PCs. Despite the decline, desktop computers and notebook computers remained two of the top three categories as measured by overall advertising volume behind digital cameras. But with the decline in desktop ads, retailers began emphasizing system enhancements such as audio and video cards, monitors and input devices. Advertising volume was up for all of these categories and rebate-based ads accounted for as much as 70% of all advertised offers.

Notebook computers, digital cameras and home networking products all became key promotional linchpins in 2002. In the fourth quarter of 2002, notebook computer ads outnumbered desktop computer ads and digital camera ad volume skyrocketed. Further confirmation of the enhanced stature of notebook computers came in a recent earnings report from Best Buy when the company indicated that it was reducing its desktop computer assortment and expanding its notebook offerings. CompUSA, meanwhile, began 2003 advertising more notebooks than desktops.

There are many reasons for the shift to notebooks including steadily improving performance from a technology standpoint and the emphasis on replacing desktop computers with mobile models. But even more important in a sluggish market is the higher cash register ring notebooks command, usually several hundred dollars more than the typical desktop. It certainly doesn’t hurt that Intel has undertaken a major campaign to push its new Centrino processor for notebook systems, directly funding much retail advertising activity.

The need to ring up more dollars and the support of steady consumer demand have contributed to the steadily rising volume of digital camera advertising as well. Digital cameras are the most widely advertised computer hardware segment, and the volume of advertising continues to grow.

Digital camera advertising is dominated by national retailers such as Best Buy, CompUSA and Circuit City, for whom the digital camera segment is the single most advertised computer category. In contrast, toner and ink cartridges are the most advertised categories for office superstores Staples, OfficeMax and Office Depot, followed by inkjet printers and multifunction products.

Among these national retailers, notebook computers have gained in importance. Notebooks represent 8.5% of all advertised products at CompUSA, the third most-advertised-category for the chain, vs. 7.6% for Circuit City and 5.7% for Staples. Home networking products are the second most advertised category for Circuit City (13% of the total) and CompUSA (10.1%).

The battle lines have clearly been drawn in 2003 over home networking gear, digital cameras and notebook computers. The weapon of choice is the advertised rebate. The battleground, a preprinted insert coming to a Sunday paper near you. May the most aggressive retailers win.

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COMMUNITY Changing Channels: Getting Close to the Customer, Part One By ChannelMedia Columnist Steve Cross

Why Retail?

This one is for new readers of this column, and maybe some brush-up for established readers. Consumer companies typically choose retail channels, as they are the most effective broad-based channels for penetrating that market. Utilizing retail channels allows a company to tak