My top 10 this month (does NOT include, Nemo, Bruce, Spurs, Devils (but it does include some amazing people and teams nonetheless). Oh well, it jumps around more than most Top 10’s but hey, it’s the Summer and we gotta keep things loose.

1. Apple Computer seems to be running with the wind at its back. Opening stores, selling iPods and millions of downloads a month at its “Apple-only” iTunes store. The numbers are quite impressive: 1 million iPods in less than one year and 5 million songs downloaded @ .99 cents in two months time. And they are just teeing up new units, more songs and a device that supports Windows in time for the holiday season. Wow! At their recent Developer’s Conference here in San Francisco, they announced the fastest PCs on the planet (according to Apple), which will help it in its goal of being the hub of the digital entertainment universe – music, video, et al. Given the success of Jobs and Co., it would be hard to argue against them. That said, I don’t understand why they can’t create even more leverage by including their (Reseller) partners more strategically into their sales activity. Most of the Resellers I’ve met with lately deplore Apple’s perverse notion of a partnership, which goes something like this: “You do what we say and we will let you sell a limited amount of our stuff at razor thin profits. And you will love us and never complain or you will be cut off from in-demand inventory.” If Apple wants to ultimately ditch PCs and notebooks in favor of media distribution sales, fine, but I don’t think that’s their plan. Hence, they need partners with physical stores, unique services and entrenched customers to promote the Apple advantage. Until they fix this piece of their strategy, they will remain a neat, interest vacation island far away from the IT mainland.

2. More or less music. ``What we were missing was a real good understanding of the foundation customer of Musicland, so we approached it kind of backward,'' Best Buy CEO Brad Anderson told Reuters in a telephone interview. ``By the time we realized that, we were well into the game and we'd made a lot of mistakes at Musicland.” Best Buy shed its money-losing Musicland Group, Inc. to investment firm Sun Capital Partners, which will take on the music and video Retailer's liabilities but not pay Best Buy any cash in the deal. ``Musicland has been a major disappointment since the acquisition was announced several years ago,'' said Merrill Lynch Analyst, Douglas Neviera. ``We view this finalization chapter as a big positive for the stock now that Musicland and related concerns are finally now behind Best Buy.'' In April, Best Buy reported $67 million in quarterly losses from discontinued Musicland operations. Best Buy bought the unit for $425 million in cash and assumed $260 million of its debt.

3. eMachines launched new services including on-site repair and extended service plans (ESP) for technical support and repair coverage. On-site service is only available to customers with extended service plans. The ESPs are available in two-and three-year plans for all new eMachines PCs at costs of $99 and $139, respectively, if purchased within 90 days of the original date of purchase. After 90 days, and prior to one year following the original date of purchase, costs of the two- and three-year plans are $139 and $179, respectively. The ESP and on-site Service Customer Care programs include the following: BigFix Proactive Technical Support, which automatically monitors and offers "Fixlet" messages for driver updates and software conflicts; Customer Care Call Center with technical support professionals; End-User Replaceable Parts Program; Depot Repair for the shipment of returned products for repair (eMachines covers all freight charges); and Authorized Service Centers, a network of over 1,200 nationwide. Hey Wayne, nice little write up in Business Week too! Way to go.

4. Circuit City is reporting a loss from continuing operations of $43.9 million, or 21 cents per share, for the first quarter, 3 cents narrower than the average estimate of 21 analysts polled by Thomson First Call. The Richmond, VA, consumer electronics Retailer attributed the drop in year-over-year sales to significant declines in average retail due to rapid technology development in the industry, and economic weakness, which was exacerbated by the war in Iraq. Circuit City considers selling its credit card business, as costs within the division increased nearly two-fold what had been expected during the fiscal first quarter ended May 31. Poor market conditions has forced the company to hold onto more securities backed by customer bill payments, which may lead Circuit City to write off bad debt if consumer default rates increase, according to Chairman and CEO, Alan McCollough. For the year ended February 28, 2003, Circuit City maintained $3.17 billion in total principal amount of credit card receivables managed, compared with $2.88 billion the prior year. For 2002, the finance business comprised over 90 percent of the company's $67 million in pretax earnings for the year, versus about 50 percent of Circuit City's $206.4 million in pretax earnings in 2001, which is partially due to declining retail sales. Ann Collier, Investor Relations Officer for Circuit City, told Reuters that although the company has not made a public show of the plans, it has attempted to slow the growth of new accounts.

5. Gateway has resumed sales of its personal computers in approximately 900 RadioShack retail outlets in Canada. Gateway’s international sales efforts had ceased two years ago in order to cut down its losses. CEO of InterTAN, Inc. owns and operates the RadioShack stores in Canada. Brian E. Levy estimates sales in the first year to reach between $8 and $20 million. The Retailer also offers PCs from HP and Toshiba. The agreement only applies to desktop PCs, but may be expanded later to include notebooks though there are no plans to offer other Gateway consumer electronics.

6. PeopleMover: Gregg Wilkes joins Digital River as Vice President of Channel Partners. According to Mr. Wilkes, his mission is evangelizing the electronic software download market to the Reseller channel, thereby helping Resellers sell more software in a more efficient, profitable manner [Gregg Wilkes] ."Keith, it's all about increasing the breath and depth of the Resellers’ offering. No shelf space, no shipping, no stock rotation, no physical goods to touch or move. It allows the Reseller to offer more value to their end-users, allowing the customer to buy what they want, where and when they want; it's a highly leveraged model for all involved.".If you would like to know more about this, feel free to contact Gregg or a member of his team at ChannelSales@digitalriver.com. Also: Our old friend Roland Serna, formerly of Buy.com and Cnet has landed a job over at NetGear and is threatening to see us all at the next RetailVisionâ. All the best to you, my good man.

7. Tweeter announced it launched phase one of its "Foundations for Winning" initiative designed to address the changes in competitive environment and evolving customer needs. Two components comprise the initiative: Operational improvement to institute best practices in key functional areas; and the development of a long-term strategic repositioning, which will include extensive consumer and industry research, a review of potential partnerships, and the evaluation of new products that will offer customers complete solutions. The initiative will involve internal Tweeter resources, outside specialists where required, and an alliance with experienced retail veterans that offer expertise in operations, strategy, consumer research and organizational assessment. Tweeter will also receive assistance from Retail Masters, a group led by Wade Fenn and other former Best Buy executives. Phase One, launched today, focuses on operational improvements, as well as industry and consumer research.

8. Palm’s long anticipated purchase of Handspring united the pioneers of the handheld business. Unfortunately, neither company is in a position of great strength. Both companies posted losses in the latest quarter and are projecting mounting losses in the current quarter. Palm, however, recently said sales of the original Zire handheld have passed the 1 million mark. Global shipments of handheld devices fell 21 percent in the first quarter, according to research firm International Data Corp., reflecting the decline in technology spending by corporations. The acquisition of Handspring will bring Donna Dubinsky and Jeff Hawkins back to Palm. The pair were Palm co-founders in 1992 but left in 1997 to form Handspring, making products that competed head to head with Palm. Palm's board also approved the spin-off of its PalmSource unit, which makes the operating software for Palm's handhelds. The combined company is expected to cut 125 jobs and expects $25 million in annual cost savings. Eric Benhamou, current Chairman and Chief Executive of Palm, will be Chairman of both PalmSource and the combined company. Dubinsky, Handspring's CEO, will be a Director of the combined company. Todd Bradley, President and CEO of Palm's solutions group, which makes the handheld devices, will become President and CEO of the combined company. Hawkins, Handspring's Chairman and Chief Product Officer, will become the Chief Technology Officer of the new company.

9. Apple opens in Hawaii - More than 1,000 people lined up outside the first Apple Store in Honolulu. At 9:00 am, the staff gathered in the front of the store for the traditional Hawaiian blessing with chanting and dancing for the following ten minutes. At 9:30 am, the doors opened the 57th Apple store and the first Apple store in Hawaii.

10. Pacific Digital's MemoryFrame extended the number of Retailers offering its product to include New York's camera accessory Retailers including: B&H Photo, Datavision, and J&R Music & Computer World. Other new Vendors include OfficeMax.com, Dell.com, Frontgate, Click Kit, Computers4SURE, RadioShack.ca, AmericanTV.com, BelAir Camera Superstore, and Dartek.

Keith Newman is the Editor of ChannelMedia. We hope you’re all keeping an eye on ChannelMedia and are planning to meet with us at RetailVision down in the beautiful Arizona desert Sept. 2-5. Do you have an item that’s worthy of inclusion? Does it impact the Retail Channel? Let us know – we may get it in for our upcoming RetailVision Preview Issue. Send items to kanewman@sbcglobal.net.

NEWS Service Provider Spotlight: Retail Research Group

We are pleased to announce the formation of the Retail Research Group. The Retail Research Group has been created based on interest from Retailers and Vendors to provide a community to direct and receive research and insight for the retail technology industry. This consortium is comprised of senior level executives from retail and Vendor organizations in the retail channel. Initially, the group will focus on directing and authoring custom research for the channel. The result will be critical industry issues being thoroughly researched, providing insight and predictions back to the membership on the data collected. The goal of the group is to deliver essential tools and information so that each Retailer or Vendor can consider the information separately for their own business strategy. In addition to research, the group will pursue cross-industry issues to develop Best Practice recommendations for the industry. The benefits to membership include the authorship and receipt of custom research of important industry issues, one-on-one access to the analysts conducting the research to privately discuss individual company issues, executive level networking and relationship building and Best Practice guidelines for the channel.

For more information, contact Nancy Splaine at nancysplaine@attbi.com or call (603) 964-9457.

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According to a filing with the SEC, Circuit City rejected an $8 per share offer by Mexican billionaire Carlos Slim Helu to purchase all outstanding shares not already owned by the Slim Family. A Slim representative made a proposal to CEO Alan McCollough, offering $8 per common share through a combination of a pre-closing dividend to shareholders, followed by a purchase transaction under which one or more affiliates of the Slim family would acquire all outstanding shares. An alternate proposal was also offered in which Circuit City's business would be combined with some businesses owned by the Slim family members, and Circuit City shareholders would receive shares in the combined company and cash totaling $8 per share. Collectively, the Slim family holds 19.05 million common shares, or 9.2 percent of outstanding shares. After speaking with the board, McCollough contacted the Slim Family representative and stated that Circuit City was not interested in discussing such proposals. Following the release of the story, shares of Circuit City rallied over 11 percent, and by mid-day, the Circuit City stock was up 9 percent to $8.72. This is similar by the family’s $10 a share offer for CompUSA in early 2000. The total value of that takeover was approximately $800 million.

Office Depot’s 2003 “Back-to-School” advertising campaign designed by BBDO New York, is a fully integrated campaign that encompasses retail marketing, direct marketing, catalogs, e-commerce, retail store materials, and public relations. Debuting the week of July 7, TV and radio ads will promote early shopping in preparation of the school season, and highlight products and services including school supply lists in the stores, “best-in-class” supplies at guaranteed low prices, and prepackages technology solutions. The campaign will also showcase its “5% Back-to-School” program and its “Star Teacher Program.”

Intel introduced its newest Itanium 2 and Xeon chips designed for high-end corporate workstations and servers. The newest Itanium 2 chip is designed for computers that contain up to 64 processors and is faster and performs better than previous versions. It operates up to 1.5 GHz with up to 6MB of integrated cache, and is priced at $4,226 in 1,000-unit quantities. This product represents Intel's continuing push into large-scale data center applications. Many major equipment manufacturers are expected to incorporate the new processors into their upgraded products, including Dell, HP, and IBM.

Red Hat announced the availability of Red Hat Enterprise Linux AS and WS for the new Intel Itanium 2 processor that will deliver performance-scaling benefits on a standards-based platform for computer-intensive business applications. Red Hat and Intel worked together to optimize the new platforms based on Itanium 2 processors, and is available for order from Red Hat.

Total worldwide shipments of computer monitors were down one percent to 28.6 million in the first quarter compared to the same quarter last year. Although flat panel display shipments increased 37 percent, up from 30 percent the prior quarter, to 10.6 million units, shipments of cathode ray tube monitors declined, according to a survey by DisplaySearch. Strongest growth for flat liquid crystal displays (LCDs) was in Europe, which realized a 19 percent increase over the previous quarter, becoming the largest market for flat panel monitors. Comparatively, sales in the U.S. increased 3 percent. Dell's LCD-branded shipments increased 182 percent over the prior year to comprise 16 percent of the worldwide market share, while Samsung maintained the number two position with 8.9 percent of the market, a slight decrease from last year, and HP followed with 7.5 percent of the market. For total display shipments that include tube monitors, Samsung remains slightly ahead of Dell in market share. Dell terminated an experiment of selling PCs through kiosks in Sears stores. The pilot kiosks were initiated in January, 2003 in Austin, Texas and Florida. Dell began closing the Sears store kiosks last month, although continues its kiosk initiative in U.S. malls and airports. Originally, the intent was to close the mall kiosks at the end of the holiday season last year – having only opened as of the middle of 2002 – however, Dell maintained them following positive results. In total, there are 57 Dell kiosks staffed by Dell employees that provide customers with information and technical assistance. No PCs are stocked at the kiosks, but rather online ordering is provided.

According to a report from the Department of Commerce, online retail sales increased 25.9 percent during the first quarter of this year to $119 billion, from $9.5 billion during the same period last year. Online sales account for approximately 1.5 percent of total retail sales, a rate that has been increasing steadily. However, another study suggests another story. Online retail spending for the week ending June 15, shrunk 8 percent from the corresponding week a year ago, comScore Networks, Inc.’s Media Metrix division reports. Online retail sales totaled $702 million, down from $760 million a year ago. Total retail sales for the week ending June 14 increased 5.8 percent from the same week a year ago, as shoppers headed into the Father`s Day buying period, according to ShopperTrak’s National Retail Sales Estimate. Online travel sales for the week were up 44 percent from a year ago, comScore reports, reaching $760 million from $528 million. Between retail and travel sales, consumers spent 13 percent more online than a year ago, with sales reaching $1.46 million from $1.28 million a year ago, comScore says.

Gateway will debut its branded PDA in the third quarter of this year. The company’s first PDA offering will feature the Microsoft Windows Mobile 2003 Software for Pocket PCs and is likely to be priced between $300 and $350, with additional devices introduced in the months following the initial launch. Gateway PDAs, targeted mainly toward the business professional, will be included in bundled mobility solutions for SMB, corporate, education, and government customers.

At the Worldwide Developers conference, Apple and IBM introduced the Power Mac G5, with IBM’s G5 64-bit computer chip with the ability to handle twice as much data as traditional PC microchips, and the industry’s first 1 GHz front-side bus. The power PC G5 processor is the result of the strategic relationship between Apple and IBM. The 64-bit chip can process data in chunks that are double the size of those handled by the 32–bit chips that run Intel-based PCs. Three Power Mac models will be available with processor speeds of 1.6 GHz, 1.8 GHz, or Dual 2GHz. The new Power Mac will run the OS X “Jaguar” operating system, which includes new server-management capabilities and automatic setup for multiple servers. Additionally, it will include Apple’s newest Safari browser, now to be the default on all future Mac computers. The new Mac will be available in August through the Apple Store at a retail price between $1,999 and $2,999 depending on features and speed.

Apple recently opened its first high profile retail store in Chicago with the following features:

• An Internet cage with Apple's new iChat AV and iSight digital video
  cameras for video conferencing.
• A Genius Bar forty-foot long that offers customers the ability to
  query the Mac "Genius," to connect to the Mac community, or receive
  service.
• Solutions Centers for music, photography, and movies to learn about
  the most recent Apple solutions..
• 48-seat theater showing demonstrations of Apple's latest products.
• Over 300 customer events each month.

Shares of Costco surged 3.4 percent in pre-open trading after the company reported fiscal third-quarter net income of $153.8 million, or 33 cents a share, up from 28 cents a share in the same period a year ago, and above the average analyst estimate compiled by Reuters Research of 31 cents a share. Net sales for the quarter ending May 11 rose 11 percent to $9.34 billion, just shy of the $9.5 billion expected by analysts. Comparable-store sales increased 6 percent.

Tech Data posted first quarter net income of $21.5 million compared with $35.1 million the prior year, a decrease of 40 percent. Analysts had expected earnings on average to be 40 cents per share, while the company had forecast earnings between 37 and 42 cents per share. For the quarter ending April 30, revenue fell to $3.91 billion from $3.92 billion a year ago. Looking forward, Tech Data cautioned that second quarter profits would be near the low end of analysts' forecasts, between 35 and 44 cents on average, an expected revenue of $3.94 billion. Tech Data's guidance for the second quarter ending July 31, are for sales between $3.9 billion and $4.05 billion, with net income between 34 and 38 cents per share.

Ultimate Electronics posted a net loss of $1.4 million for the fiscal first quarter while sales increased 10 percent to $155.7 million, although same-store sales decreased 8 percent. The company indicated strong sales in larger format and flat panel televisions and expects continued strong sales of these products, and weak sales in audio, video, and home office business products. Additionally, the company stated that it would no longer sell core computer products, and plans to eliminate these product offerings during the second and third quarters of fiscal 2004, focusing on home audio/video server products. Core computer products represent 2 to 3 percent of total sales. In the second half of 2003, the company plans to open seven new stores: one in the Twin Cities, two in Austin, Texas, three in Kansas City, Missouri, and one in Wichita, Kansas.

Circuit City scheduled a partial remodeling project for five of its retail locations, including new signs and fixtures. The stores are located in Rouville, Manassas, Springfield, Fairfax, and Sterling, Virginia. These renovations will be complete by the end of the summer. Additionally, in May, Circuit City signed a leasing agreement with Vandercar Holdings and plans to start construction of a new store on June 2, 2003 in Cincinnati. This store is expected to open at the start of the 2003 holiday season. In conjunction with the opening, Circuit City will be closing its Ridge Road Cincinnati store. Lastly, after a four-month closure the Circuit City’s Bailey’s Crossroad Washington retail location reopened in May. This store is a new design for Circuit City with 36,500 square feet, wider aisles, better lighting, more selling space, and more merchandise on the shelves. By the end of the summer, a second location in Washington will also have the same store concept.

Best Buy announced plans to open two retail stores in Winnipeg, Ontario this summer; however, the store concept remains undisclosed. In January, 2003, Best Buy announced it would be opening a 45,000 square foot retail store at the Walden Galleria mall in Buffalo, New York. But in May, General Cinema, an AMC theatre and the current tenant of the site, stated that it had no intention of moving from the location. In response, Best Buy is looking elsewhere in the Buffalo-Niagara area for an alternate location. The first Lawrence, Kansas Best Buy retail store will open its doors on June 13, 2003. The store is only 30,000 square feet, which is 15,000 square feet less then the current concept V store, with all standard-size store departments. The departments include music, movies, games, computers, stereos, televisions, wireless phones, digital cameras and home appliances. This location will employ 150 full- and part-time workers. Best Buy made the decision to open a store in Lawrence due to the limited number of consumer electronics retail stores and the community demographic. Lawrence is a big college town, which means many “early adapters”, Best Buy’s main target market. Best Buy signed leases on 24 stores in 17 states that are planned to open by March, 2004. One lease is for the relocation of an existing store, otherwise, all others are for new retail stores. Most of the stores leases are in existing markets, although new markets include Twin Fall, Idaho; Rapid City, South Dakota; and Charlottesville, Virginia. Prior to this, Best Buy had signed an additional 40 leases in January, for stores that began opening as of March 2003.

Kmart Holding Corp., under pressure to prove it can succeed after emerging from bankruptcy last month, on Monday reported a quarterly loss of $862 million. The third-largest U.S. discount chain said its gross margin improved, and it was working to reduce costs, but sales continued to decline in the first quarter ended on April 30. ``What we have to see is evidence of increased same-store sales -- not just lower negative numbers,'' said Kurt Barnard, President of Barnard's Retail Consulting Group. ``Gross margins have improved -- that's very good but there's nothing I can sink my teeth into. Shares of Kmart rose 8 percent. The company issued shares in the reorganized company to creditors while its former common shareholders received nothing, so the stock is concentrated in relatively few hands and can be volatile. ``I expect that the shares will continue to do reasonably well because if you look at Kmart on a recurring basis and ... get down to core operations, you can see that things generally reflect improvement,'' said Richard Hastings, Chief Economist and Retail Analyst with consulting firm Bernard Sands. ``Kmart is looking pretty stable right now,'' he said, ``but what we're waiting for is enough of a trend outside of bankruptcy, and that's going to take at least six to nine months.''

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RESEARCH

Will Photo Kiosks Help Drive Digital Camera Sales?
By: Amy Wiyninger
Research Analyst, Digital Cameras
June 19, 2003

“I am considering buying a digital camera, but still don’t know how to get prints.” This is the exact sentiment of so many consumers wanting to purchase a digital camera as people want to preserve memories with photos, not files. The number one reason in 2002 for taking digital pictures was to preserve memories, a shift from the top reason in previous years of sending pictures via email, according to PMA Market Research.

With improved resolution and dropping prices, digital cameras increasingly appeal to the mass market. Especially in the higher technology segments, prices have been falling dramatically over the past year, now allowing the average customer to purchase an affordable 3 or 4-megapixel camera: ARS notes that the average retail street price of 4-megapixel cameras has dropped over the past year from just over $600 to the current average price of $473, a decrease of 22 percent. In addition, the average street price of 5-megapixel cameras is currently just below $700, a huge drop from the price tags of over $1,000 in May 2002.

*Estimates peg current digital camera penetration at roughly 23 million U.S. households, or almost 20 percent--a threshold at which “mass market” is often defined. By the end of this year, PMA predicts as many as 33 million U.S. households may own a digital camera.

With pricing providing the catalyst for mass digital camera penetration, and “preserving memories” taking the lead for reasons to take digital prints, the market is primed for the digital printing industry to take the lead and grow at an astounding rate. Although the overwhelming majority of digital camera users continue to make their prints at home, consumers are slowly utilizing other options, such as online photo sharing sites, retail digital photo labs, and digital photo kiosks.

ARS believes that the growth rate for printing digital images would be much more drastic if the process from start to finish was as easy as dropping off a roll of film for 1 hour developing, as many consumers currently wanting hard copy prints from something other than the home printer do not know where to look or where to start. Not only would more digital camera owners print images, but more consumers would purchase a digital camera if the printing process was easier. Luckily for them, many Retailers are increasingly offering customers the option of digital photo kiosks and in-store digital photo processing.

CVS recently announced its plan to roll out Kodak Digital Stations at more than 3,000 stores nationwide, making CVS the first national chain to offer customers the opportunity to print from digital media in all of its photo lab stores. CVS currently has about 4,100 stores nationwide. The Kodak Digital Stations are estimated to be in place by mid-summer of this year. Polaroid is currently testing a line of photo kiosks in photo shops around Boston. Fuji also offers customers Aladdin Picture Centers for making prints from digital media. A large percentage of photo kiosks that are currently being installed are designed for digital camera users rather than offering simple enlargement and reprint capabilities for film users. InfoTrends Research Group indicated that almost half of all photo kiosks shipped in 2002 were designed exclusively for digital camera users, up from 16 percent in 2001.

In order for the digital camera market to penetrate the remaining 80 percent of U.S. households, consumers need an easy way to process and print their digital images. Customers want to know how to go from purchasing their first digital cameras to making their babies' first photo albums. Digital camera manufacturers and Retailers have both answered this question in different ways, but the digital photo kiosk market offers great potential as a catalyst for continued digital camera penetration.

ARS Research
Wi-Fi Handheld Scorecard
By: Sam Bhavnani, Mobile Computing Analyst

These days it seems that you can’t pick up a magazine, surf a Web site, or walk through a Consumer Electronics Retailer without stumbling across the ever-popular Wi-Fi technology. The buzz surrounding the new technology is very high and -- in reality -- it is a technology that is over hyped. During uncertain economic times and technological slowing, Wi-Fi is one positive aspect the battered tech sector can grab on to. The push has been very public and well known companies like: Intel, Starbucks, T-Mobile, McDonalds, and Verizon have led the charge.

The launch of devices with integrated Wi-Fi (802.11b today) capabilities coupled with the rapid deployment of Hotspots has made Wi-Fi the technology of 2003. Wi-Fi is still in its infancy and providers are still struggling with figuring out exactly how to price the service. In the corporate space, everyone is wondering, “is this secure enough?”

Expanding the world of mobile computing devices with integrated wireless is an important step in expanding the world of Wi-Fi. This is the reason that Intel’s Centrino launch (the “Unwire” marketing campaign) is the most important IT event this year. Customers are now aware of their ability to purchase devices that have built-in Wi-Fi and do not have to rely on purchasing a third-party card that costs extra money and may be lost.

Currently the technology is too expensive to reach mass adoption. For Wi-Fi to realize its full potential, a few things still need to happen. One is a massive campaign by the providers, similar to the free month of service that AOL offers for dial-up access: T-Mobile is taking the early lead on this front with free trials. Another is offering the service as a free or cheap ($5 per month) add-on to existing monthly Internet or cellular contracts: Verizon is taking the early lead on this front, providing free access to existing online customers.

Below is a table showing the rates for well-known Wi-Fi providers/aggregators.

The second challenge to adoption is the fact that Wi-Fi is still not a simple technology to understand or use. The concept of the KISS principle (Keep It Simple, Stupid) has not yet been reached in the Wi-Fi space as there are problems of simply figuring out which of the many available networks (paid or free) is the right connection to sign on to at the time. In addition, at this time, none of the major handheld players are offering a free trial of Wi-Fi service with the purchase of a Wi-Fi enabled device.

Challenges aside, Wi-Fi is for real, and although the major players haven’t yet reached what ARS believes to be the biggest hurdle to adoption, a $299 price point, they do have the Wi-Fi initiatives in place. That said, ARS has taken the opportunity to grade the handheld players on their current Wi-Fi offerings.

Palm
Grade – A-
Palm currently has one model with integrated Wi-Fi, the $499 Tungsten C. It is the company’s first model with integrated Wi-Fi and is the only Wi-Fi enabled handheld on the market with a built-in keyboard. Palm is also the only major company that has a Palm-OS device with integrated Wi-Fi. Palm is also taking initiatives to help enable VoIP via Wi-Fi and its Tungsten C. Merging the data-oriented focus of Wi-Fi with voice will help the company reach out to a wider audience.

Specs:

• Palm Tungsten C – Wi-Fi integrated
• OS – Palm OS 5.2.1
• Processor – Intel PXA255 400MHz Xscale
• Screen – 320x320 transflective TFT
• Memory – 64MB
• Battery – 1400mAh Rechargeable Lithium Ion/Polymer
• Expansion – SD/MMC
• Size – 4.8” x 3.07” x 0.65”
• Weight – 6.3 ounces
• Price - $499
  

Sony
Grade – D-
Sony does not offer any models with integrated Wi-Fi. It offers several models with a “Wireless LAN Slot.” The slot holds the Clie Wireless LAN Card, which will cost users an additional $149. The spread of Wi-Fi adoption is relying on wireless integrated into devices. When a solution requires an additional purchase and an additional item for a customer to potentially use, it is no longer a simple solution. For this reason, ARS believes Sony has some ground to make up in the space.

The Sony models that will accept the Wireless LAN card are the $399 PEG-NX60, $499 PEG-NX70V, and the $799 PEG-NX90. The addition of the wireless card bumps the prices up to $549, $649, and $949, respectively. Sony does offer a $399 device with a built-in keyboard and integrated wireless, the PEG-TG50; however, the wireless is Bluetooth and not 802.11.

Specs:

• Sony Clie PEG-NZ90 – Wi-Fi via $149 expansion card
• OS – Palm OS 5.0
• Processor – 200MHz
• Screen – 320x480
• Memory – 16MB
• Battery – Lithium-ion polymer rechargeable battery (removable)
• Expansion – Memory Stick / CF Type II Communication Slot
• Size – 3" x 5.63" x 0.91"
• Weight – 10.3 ounces
• Price - $799 ($949 w/ Wireless LAN card)

Toshiba
Grade – B+
Toshiba launched its first Wi-Fi device in June 2002, the e740. The company has since revamped the product and is today offering the $599 e750. Toshiba surprised many last year with its pricing and feature sets, helping drive down pricing and enabling the Pocket PC platform to more effectively compete with Palm OS devices. Toshiba has offered Wi-Fi for one year now and is continuing its initiatives in the area; for this reason ARS is positive on Toshiba’s Wi-Fi strategy.

Specs:

• HP iPaq 5455 – Wi-Fi integrated
• OS – Pocket PC 2002
• Processor – Intel PXA255 400MHz Xscale
• Screen – 3.8” 320x240 transflective TFT
• Memory – 96MB (64MB SDRAM/32MB NAND)
• Battery –Rechargeable Lithium Ion/Polymer
• Expansion – SD/MMC
• Size – 4.9” x 3.1” x 0.6”
• Weight – 6.7 ounces
• Price - $599

HP
Grade – A-
The HP iPaq has been the most successful Pocket PC and the company has a clear design win. The iPaq 5455 features integrated Wi-Fi, Bluetooth, and a biometric thumbprint security system. The device is currently priced at $649. HP as a company is committed to expanding the popularity of Wi-Fi and is working with Starbucks/T-Mobile to help promote their platform. HP stands out for its efforts in promoting Wi-Fi hotspots in addition to integrated the technology in its devices; for this reason ARS is positive on HP’s Wi-Fi strategy.

Specs:

• OS – Pocket PC 2002
• Processor – Intel PXA255 400MHz Xscale
• Screen – 3.8” 320x240 transflective TFT
• Memory – 64MB
• Battery – 1250 mAh Rechargeable Lithium-Ion Polymer
• Expansion – SD/MMC
• Size – 5.43” x 3.3” x 0.63”
• Weight – 7.26 ounces
• Price - $649

Dell
Grade – D
Dell created a frenzy when word of its plans to enter the handheld space leaked in June 2002. The company’s strategy was to create a low cost Pocket PC to compete with HP and its premium priced iPaq line. Its “entry-level” Axim A5, which has a 300MHz processor and 32MB RAM, costs $199 and its $325 “advanced” Axim A5 features a 400Mhz processor and 64MB RAM.

To enable the Axim for Wi-Fi connectivity, a customer must purchase a True Mobile 802.11b Wireless Compact Flash card for $69. The card fits in the Compact Flash slot on the Axim, which also has a SD slot. The Dell Wi-Fi handheld solution will cost $268 for the “entry-level” model and $394 for the “advanced” model. The pricing is certainly in Dell’s favor; however, an integrated solution would be a wiser choice. Dell does plan on releasing a model this year with integrated wireless, but exact timing or pricing is still unknown. Dell, like Sony does not offer an integrated solution, which places them behind the pack.

Specs:

• Dell Axim A5 Advanced– Wi-Fi via $69 expansion card
• OS – Pocket PC 2002 Premium
• Processor – Intel 5 400MHz XScale
• Screen – 240x320
• Memory – 64MB
• Battery – 1440 mAh Lithium-Ion Removable, Rechargeable
• Expansion – SD/MMC, CF
• Size – 5.04” x 3.21” x 0.71”
• Weight – 6.9 ounces
• Price - $325 ($394 w/ Wireless 802.11b card)

Major device makers such as Palm, Sony, HP, Toshiba, and Dell must take a more involved role in helping customers take advantage of the Wi-Fi revolution. The first step in this process involves offering reasonably priced devices with an integrated 802.11 solution. The second step involves collaboration with Hotspot providers to promote usage and sign on new customers. This step is important because Wi-Fi access from the major providers is too expensive for most customers.

RESEARCH

ChannelMedia Q&A: Maxtor Corp.

Rachel Forke is Director of Channel Marketing at Maxtor Corp. Prior to joining Maxtor in 2001, Forke served as Director of Channel Marketing for Fujitsu Computer Products of America, where she led the channel marketing team in quarterly plan creation, budget and plan management, customer interaction and relationship marketing activities. Cumulatively, Forke has 13 years of progressive marketing and management experience in the high-tech industry. Before joining Fujitsu, she held management positions at Silicon Graphics, Western Digital and McDonnell Douglas Corporation.

Q: Despite the competition in the storage space, Maxtor seems to be doing real well. What is the key to your success?

A: First, we offer one of the broadest product lines on the market. We see studies today that Resellers are being more selective on which Vendors they are partnering with, so the supplier with the larger portfolio would be a more cost-effective and efficient partner. We also understand the importance of meeting the channel's needs. Even though we sell through distribution, we have direct relationships with the Retailer and integrator as well. We have a strong field sales team that provides one-on-one support to strategic accounts. We also hold advisory council meetings twice a year where we solicit feedback on everything from pricing to channel programs to customer service requirements. We want to take that extra step to understand and provide value to our customers.

Q: Are there any new channel programs or ways the channel work more synergistically with Maxtor?

A: We’ve expanded our work with merchandising and training organizations to help retail store reps better understand our products and promote them to their customers. We also continue to leverage retail advertising vehicles to help drive sales. We encourage Retailers, Resellers, System Integrators and builders to become a member of our MaxtorVIP Partner Program (www.maxtorvip.com). Through this program it allows us to work together as true partners by encouraging ongoing feedback. As part of the Maxtor VIP Partner Program, Maxtor will be rolling out a Maxtor Test Drive program, which allows partners to test new technology at a discounted price. We will also be rolling out an online training program this summer, as well as an online literature and materials program that will have these items shipped directly to the Reseller in support of tradeshows, training, etc.

Q: What makes Maxtor's channel program different from the competition?

A: We listen to the needs of our customers and offer the programs to match. Also, our online RMA service is one of the best in its class. We provide quick turn around with 24/7 RMA availability, and up to 100 disk drives can be returned in one transaction. We've also recently completed a third-party survey of our partners and the results were encouraging. We excelled in many of the categories such as sales/support, customer service, pre-sales materials and communication. It validated that we're on the right track.

Q: How does the rest for the year look in your crystal ball?

A: Very well. We have many things moving in our favor. We continue to report positive earnings, have a strong management team, and are fully integrated based on the Quantum hard drive acquisition in 2002. We are also adding manufacturing capacity by opening a new facility in China, expanding channel service offerings worldwide, and we continue to improve on the quality and performance of our products.

RESEARCH

ChannelMedia Q&A
Bob Hammond, Mirror Image, CTO

Mirror Image Internet, a leading global e-Business provider of managed content delivery, e-Commerce and Web services, increases the speed, performance and reliability of content, application and transaction delivery. We had a phone interview with their CTO Bob Hammond who gave us the latest download.

Q. How do you attract Resellers at Mirror Image?

A. We attract Resellers either through the advertisement of our Channel Partner Program or by actively recruiting targeted Resellers. We target Resellers whose current customer base is a perfect fit for the services that we offer (content delivery, streaming, e-Commerce). Together with the partners' offerings, a compelling joint offering is formed. For this channel to be successful, it requires active support of these partners. Therefore, MII is very selective of its Resellers and only partners with the Reseller if, and only if, they can be properly supported and the services MII offers are key to the success of the Reseller.

Q. Why is it important to you to have a Reseller channel?

A. Really two reasons: First, by jointly packaging offerings from MII and the Reseller, the two companies can offer their customers a superior content delivery offering, which could not be offered independently. This leads to an increase in the number of customer wins. Second: Many of the Resellers are larger telco's that have an established brand. By partnering with these companies, MII can use their established brand as a tool in its own sales process.

Q. What is the Channel Partner Program all about? How do you join?

A. The Channel Partner Program was established a couple of years ago so that both Resellers and referral partners would receive the support they needed to be successful. The program contains all the tools necessary to deliver MII services to customers. Additional details of this program (including the names of our partners) are outlined at www.mirror-image.com/partners/overview.html. Joining is easy for referral partners. Simply send an e-mail to sales@mirror-image.com and indicate your interest, and one of our Referral Partner Managers will contact you. Our Referral Partner Manager also actively recruits referral partners that have a customer base which can benefit from the services that MII offers. For Resellers: MII actively recruits targeted accounts and many times these larger Resellers call into MII because they see the value of a partnership. Because Resellers take a lot of resources to support, we limit the number of Resellers we partner with to ensure that the support needed to be successful is always there.

Q. Why would Resellers be interested in Mirror Image?

A. Two reasons: First, Mirror Image Internet closely partners with Resellers and offers full support from day one. Second, by combining services, the new joint offering is much more compelling to a Resellers' customers than their current services alone. Together they can win more customers and sell additional services to their current customer base. This leads to increased customer numbers and a higher revenue base per customer.

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COMMUNITY Changing Channels: Strategy - Revisited By ChannelMedia Columnist Steve Cross

Sponsored by:

Strategy is defined by Webster’s Dictionary (office edition) as: a plan of action, esp., for attaining a goal. I hear people say they have a channel strategy. Makes sense, except that’s not what they mean. They mean they’ve selected indirect channels rather than direct sales as a sales vehicle. That isn’t a strategy. Or people say they have a rep strategy. That isn’t a strategy either. It’s a choice of one form of sales vehicle over another. That’s all.

A strategy, or strategic plan is just that, a plan: 1) a method or scheme for achieving or doing something, 2) an aim or goal, 3) to draw up a plan or design. To build a strategic plan you have to put forward some advance preparation, analysis, and thought. It’s sort of hard work, demanding an understanding of where your business is at and where you want it to go. When you watch the ways the leading companies implement their channel strategies they are about as precise as possible. Gone are the days of backroom deals and channel programs crafted on the back of a bar napkin.

I love sitting down with a team of execs and figuring out an optimal strategy. Together, we look at product positioning, target end-user demographics, internal infrastructure and burdens on infrastructure, complimentary channels, points of leverage and tipping points, sales and marketing issues, advertising, PR, budgets, and really dig in to build a real strategy. The big wins in my career (Connectix and Dazzle in the last few years, Insignia in the late 80’s, etc.) have all come as a result of building a strategic plan and then executing it.

Today, the real leaders in our industry have strategic plans: HP, IBM, Sony and Microsoft. Of course, you can say that they’re big companies with lots of resources, and you’d be right, but look how they spend these resources. They all have plans and they execute to the plans. That’s one way they got to be leaders.

One caveat; the product has to work. About a dozen years ago I spent some time doing a plan for a company/product called DataClub. It was an early peer-to-peer database product, a little too early, so it never did work. They spent $18 million on development and it never worked. Oh well, at least the plan was good.

Contact Steve Cross at steve@crosschannel.com, 702-492-7472.

Editor's Note: Steve is a top channel consultant who offers services from one-day brainstorming sessions to complete channel strategy plans. He has helped numerous companies to increase revenue and enhance their channel success.