NPD Group – Hot Software Sellers

Changing Channels - The Next Tech Revolution By Steve Cross

e-Xperience in Software Sales 2004 By Keith Newman

NEWS


Retail Top 10

2. ARS Analysis: The key to eMachines’ profitability lies in a tightly run operations model; the company’s sales, general and administrative cost (SG&A) is amongst the lowest in the industry, a model for which Inouye can largely be credited. ARS believes one of the major reasons Gateway is acquiring eMachines is to leverage the success Inouye has seen and lower SG&A expenses with a goal of becoming profitable in 2005. This fact alone suggests that a major focus of the integration of the two companies will be to significantly reduce the operational costs at Gateway soon after the merger is approved to create a leaner, more dynamic operations structure. Last week, Gateway announced intent to acquire eMachines, Inc. for $235 million, making it the third-largest computer company in the U.S. The planned acquisition was announced at a media conference exactly one day after Gateway posted an eleventh straight quarterly loss. Unlike its purchaser, eMachines has been profitable for nine consecutive quarters, due to a dramatic turnaround under Wayne Inouye, CEO of eMachines. Moving forward, the companies will focus on scale and rapid consumer electronics growth, which Ted Waitt, CEO of Gateway, indicated was likely to come primarily through digital television and digital camera products. In doing so, the companies must leverage eMachines’ domestic and global distribution, established retail relationships, low-cost structures and savings through best practices.

Channel Analysis Beyond eMachines’ enviable low-cost structure; the company has a lot more to offer than Gateway in terms of “retail reach.” eMachines has well-established alliances with some of retail’s heaviest hitters such as Best Buy, Circuit City and Wal-Mart – to name just a few. For a brand integrator like Gateway, these alliances could form a perfect pathway for its newly established and growing line of consumer electronics (CE) products. If Gateway is successful in penetrating retail in this manner, even rival Dell’s CE group would be envious of the advantageous position. Gateway may eventually consider closing its costly 190 Gateway Stores. ARS joins most analysts in the believed inevitability of some store closures in the near future. Ultimately, it is Gateway that stands to benefit the most from this deal. There are many complexities in a merger like this one, but eMachines’ low-cost survival strategies, profitability, retail reach and recent international success in Europe and Asia all hold promise if Gateway can implement effectively. PC Industry Analysis In terms of Gateway’s PC business, the company does not intend to offer Gateway-branded computers through mainstream retail. Instead, Gateway will continue to sell its own computers –including server and storage products- through direct channels and/or through Gateway Stores. On the contrary, all eMachines-branded products will continue to be sold through the retail channel exclusively. Noteworthy is the recently improved position of eMachines’ desktop PC offering. Following a failure to boost overall average selling price (ASP) and sell high-end desktops over two years ago, eMachines made several inroads in the improvement in the overall quality of its product, placement, service and brand mindshare. To that end, eMachines has just recently been able to post significant gains in the low-end, sub-$500 PC market as well as several PCs selling successfully within the ‘sweet spot’ range between $600 and $800. Beyond offering a much more competitively-priced product line than Gateway, eMachines is responsible for delivering some of its own “disruptive” pricing in offering the first rewritable DVD drive clad machine for under $800. More recently, eMachines posted a first-to-market win for its AMD 64-bit Athlon 64-based computer selling for $1,299. But in the notebook space, eMachines is still considered a new player. Gateway, which offers a diversified lineup of entry-level, mid-range, and high-end systems, has seen success in this market. To continue its push, eMachines must look to leverage Gateway’s experience and presence in the notebook space into its own product strategy and roadmap. eMachines’ desktop PC momentum has been so solid that if it wasn’t for it’s naïveté in the notebook market and the absence of servers, storage and commercial PC penetration in general, ARS could see Gateway turning the entire PC business over to eMachines. In fact, Gateway’s notebook experience and small business PC following are the two foremost advantages it has to offer eMachines as a company. Who Stands to Win? Ultimately, it is Gateway that stands to benefit the most from this deal. There are many complexities in a merger like this one, but eMachines’ low-cost survival strategies, profitability, retail reach and recent international success in Europe and Asia all hold promise if Gateway can implement effectively.

--- ARS and Channel Analysis By: Jennifer Gerlach, Toni Duboise, Sam Bhavnani (ARS Research)

3. According to the latest findings of the NRF Executive Opinion Survey, retail executives are anxiously looking to the new year with a renewed sense of optimism and hope. The Retail Sector Performance Index (RSPI) reached a new record in January with a reading of 65.0%t, more than double the same period a year ago, and 9.4 percentage points above December's reading. (The RSPI measures retail executives' evaluations of monthly sales, customer traffic, the average transaction per customer, employment, inventories and a six-month-ahead sales outlook expectation. The RSPI is based on a scale of 0% - 100% with 50% equaling normal.) The January Current Demand Index (average of sales and traffic) posted its strongest reading since the survey began with a reading of 68.1%, well above the 25.5% for the same period a year ago, and 10.8 percentage points above the previous month's reading. The 75.0% sales index was incredibly strong in January, showing that Retailers have done a great job of clearing excess winter inventory while continuing to collect on gift cards that were purchased during the holiday season. The sales index for January was roughly three times stronger year-over-year, and 15.6 percentage points higher than December 2003. Customer traffic also remained strong in January (58.3%), 2.0 percentage points above the previous month. Retailers are continuing to show a great deal of confidence that the current sales environment will continue. The January Demand Outlook Index (a six-month outlook for sales) stood at 75.0%, a solid increase from last month's reading of 62.5% and the strongest since the survey began in September 2002.

4. More Data: Preliminary results show a 5.8% jump in January sales over last year, according to the International Council of Shopping Centers' index. Discounters led the way, but there were robust results from department stores, apparel and specialty Retailers as well. "Finally, we have a picture that's good across the board," said ICSC's economist Michael Niemira. January's results were the best since September's 5.9% gain. In a shift from blaming the weather to embracing it, most Retailers noted that the burst of bitter cold - even record-breaking -- temperatures and snow in many parts of the country helped sales. But clearly, analysts said, the usually slow January sales picked up as consumers redeemed holiday gift cards. And it helped too that Retailers were tight on inventory compared to other post-holiday months when they've feverishly slashed prices to rock-bottom levels to clear shelves and racks for spring gear. "January continues to gain as a percentage of total annual sales, and this January shows some of the best numbers we've seen yet," said Bernard Sands analyst Richard Hastings. "January is no longer the throw-away, markdown, clear-'em-out month that it was a generation ago." Wal-Mart set the tone early by reporting a surprising 5.7%t jump in sales at stores open longer than a year - a key industry benchmark known as comparable-store sales. The company has consistently kept its January forecast in the 3% to 5% range. Analysts reporting to Thomson First Call on
average expected Wal-Mart's sales to rise 4.1%."Sales continued to build as we moved through the month," the company said. "Cold weather positively impacted our apparel business." Sales at the namesake stores climbed 5.3%t. Sam's Club produced a 7.9% gain. In fact, it was the wholesale club segment that did best, clocking a 10.7% jump. Costco blew by estimates with same-store sales higher by 13% rather than the 8.6% at First Call, thanks partly to the strikes at grocery stores in Southern California. The entire state accounts for about one-third of Costco's total sales. BJ's Wholesale pulled in such strong sales that it raised fourth-quarter profit projections. Including a 1%lift from gasoline sales, same-store sales jumped 8.8% - notably higher than the 5.2%t expectation at First Call. BJ's ascribed much of the fourth-week boost to the Super Bowl, noting that both teams were in BJ's market. On the apparel and specialty-retail front, sales of heavy sweaters, coats and winter-weather accessories drove sales. By far the most stunning results came out of the long-beleaguered department-store group, which delivered a 4.8% gain compared to last year's drop of 1%. What's more, it was the best showing since April 1998, with much of attributed to giftcards.

5. Office Depot reported fourth-quarter net earnings of $45.8 million, or 15 cents a share, down from 21 cents a share in the year-earlier period. Total sales rose 14%t to $3.3 billion, matching analyst forecasts, while global same-store sales fell 2%. Worldwide web sales for Delray Beach, FL-based Office Depot, Inc. reached $2.6 billion for the year just ended, the company reported today, up 25% from the prior year. Total company sales grew 9% to $12.4 billion. Web sales accounted for 21% of all sales vs. 18.3% in the prior year. Comparable store sales were down 2%. In the fourth quarter, web-based sales were up 31% to $726.4 million while total sales grew 14% to $3.3 billion. Q4 web sales were 22% of all sales. Comparable store sales were down 2% in Q4. Office Depot reports that its 22 North American delivery centers experienced higher productivity and declining costs while delivering high metrics on customer service quality. Net earnings for 2003 reached $276.3 million. Net earnings for the quarter were $45.8 million

6. Circuit City was up 45 cents, or 4.2%t, to $11.23 after reporting that it will close 19 superstores and take a $35 million charge as it struggles to fix its business. Circuit City announced it will close 19 Superstores by the end of the month, continuing its initiatives to improve the company's overall financial performance. "An analysis of markets across the country has identified 19 Superstores where the trade area can no longer support a Circuit City Superstore, leaving the locations with no reasonable expectation of positive cash flow in the near future," said Alan McCollough, Chairman, President. The analysis also shows that near-term relocation opportunities do not exist for these stores. The decision was difficult to make because of the impact on our Associates, but the move will enable management to better focus attention on improving the performance of the other 600 stores." The 19 stores combined had revenues of $151 million for the 12-month period ended December 31, 2003. In most cases, Circuit City customers who are affected by the store closings will have the option of shopping at a nearby Circuit City Superstore. All customers will be able toshop with Circuit City on the Web at circuitcity.com or over the phone at 1-800-THE CITY. In addition to the store closings, the company's fiscal 2004 real estate plan includes 18 Superstore relocations, eight new Superstores in incremental trade areas and four fully remodeled Superstores. This plan will be completed with the store closings and seven Superstore relocations planned for February. Since the beginning of fiscal 2001 through February 29, 2004, 131 stores, or 22% of the company's store base, will have been relocated, newly constructed or fully remodeled. Circuit City reiterated its expectation to open 65 to 70 Superstores in the upcoming fiscal year, depending on real estate availability. Slightly more than half of these stores will be relocations. The company expects that at the end of fiscal 2005 approximately 30%of its store base will have been relocated, newly constructed or fully remodeled since the beginning of fiscal 2001.

7. Microsoft joined the Future Store Initiative, international Retailer METRO Group's technology-based vision of the 21st century grocery shopping experience. The first Microsoft solutions specifically developed for the project were unveiled at the METRO Group Future Store exhibit at the National Retail Federation (NRF) Convention 2004. "Microsoft's retail perspective and expertise bring together the consumer, the store and the retail enterprise, which fits extremely well with the METRO Group view," said Zygmunt Mierdorf, member of the management board and chief information officer of METRO Group. "We believe that the future of shopping lies in technology, both in the hands of consumers and extensively, but unobtrusively, deployed throughout the store, to create a more satisfying shopping experience and a more profitable, sustainable business." According to Brian Scott, General Manager of the Retail & Hospitality Solutions Industry Group at Microsoft, "It is clear that competing on price alone is a losing strategy. Retailers need to differentiate themselves from their competitors by using technology, both to understand individual customers' wishes, even before they are expressed, and to have the agility and real-time overview to deliver on these aspirations. The new solutions we have created for the METRO Future Store directly address the key business factors that define differentiation: smarter selling, smarter shopping and smarter in-store operations." These next-generation Microsoft-based solutions, demonstrated at NRF this week, include real-time retailing solutions that leverage advanced communications capabilities in the store, as well as wireless and mobility applications that empower store managers to make more-informed, timely decisions. The real-time retailing solutions have been developed in conjunction with Sysrepublic, a Microsoft software development partner. They include fraud detection at the checkout stand and staff scheduling based on customer traffic analysis. Applications such as these take advantage of the IP telephony capabilities that METRO Group is integrating into its stores, real-time application integration capabilities from Microsoft, and in-store wireless devices such as Personal Shopping Assistants.

8. Big-ticket high-tech items and discount shopping topped consumers' 'hot' lists along with low-carbohydrate diets heading into 2004, according to the latest study by BIGresearch. Shopping at discount stores was seen as 'hot' by 80% of respondents, while 67% said so about shopping at dollar stores. Of 9,500 consumers polled, 84% said they considered plasma televisions 'hot' in 2004, while 80% said the same about picture cell phones. "Most of today's consumers believe in buying certain merchandise at the lowest prices available, and discount and dollar stores provide ample opportunities to do so," said Gary Drenik, President and CEO of BIGresearch. "At the same time, consumers see value in such cutting-edge luxuries as the picture phone and high-end television sets." Consumers said discount shopping stores were their first and foremost choice for women's, men's and children's clothing as well as toys and linens. Of those who labeled plasma televisions and picture cell phones as "hot," 28% shop most often for electronics at Best Buy and 23% do so at WalMart. Circuit City ranked third among those buyers at 10%. Low carbohydrate diets were another 'hot' item among consumers; 72% of consumers thought so, while 28% disagreed. Brightly colored apparel was seen as 'hot' by 53% of those surveyed; 47% disagreed. Brightly colored housewares had 49% of the votes for 'hot' while 51% said no. More findings are available here.

9. Online holiday purchases charged full-speed ahead in the fourth quarter, with Amazon.com in the forefront of growing success for at-home shopping Retailers. Sales in Amazon's consumer electronics segment in North America jumped 22% in the three months, hitting $352.5 million, up from $289.8 million in the year-ago period. Fourth-quarter sales in the North American media segment, which includes DVD/video and video games and game consoles, climbed 16%, reaching $750.9 million, compared with $648.6 million year-on-year. Overall sales in North America grew 18% in the fourth quarter, ended Dec. 31, to $1.1 billion, from $966.7 million in the same period in 2002. Gross profit in North America swung upward 19% in the three-month holiday period, hitting $289 million, from $243 million in the fourth quarter a year earlier. Operating income for the three months grew 39%, to $114 million, compared with $82 million in the same three months in 2002. Fourth quarter profit margin remained at 25% year-over-year. For the 12 months, North American consumer electronics segment sales at Amazon soared 29%, to $878.5 million, compared with $681 million the previous year. Media segment sales rose 14% for the 12 months in North America, reaching $2.3 billion, up from $2 billion the previous year. The combination of free-shipping and healthy discounting helped the Internet Retailer report improved consolidated fourth quarter and yearly sales, with Amazon recording its first annual profit. Amazon enjoyed a 36% increase in consolidated fourth quarter sales, rising to $1.9 billion, from $1.4 billion in the same three months a year ago. Sales benefited by $98 million from changes in foreign exchange rates quarter over quarter. Without the benefit, sales would have increased 29% . Consolidated operating income about doubled for the period, hitting $137.6 million in the fourth quarter, compared with $70.5 million in the same quarter last year. Net income reached $73.2 million, a big jump over the $2.7 million recorded year-on-year. Pro forma net income grew 66% in the fourth quarter, to $125 million, up from $75.4 million in the same three months a year ago. 'Our commitment to year-round free shipping and lower prices continues to be a winner for our customers and Amazon.com,'

10. Misc. Retail News - An additional week added to fourth quarter sales and earning results for the retail and related services segment at Sears, helped the Retailer achieve a 3.6%t increase in sales for the three months, hitting $10.1 billion, up from $9.7 billion in the year-ago period. Comp-store sales, with the extra week, dropped 2.1% in the fourth quarter, ended Jan. 3, with sales trends impacted by later-than-anticipated consumer seasonal purchases and a difficult promotional environment. Sears said consumer digital products did well in the three months. Gross margin, due to additional promotional and clearance activities, dropped to 28.9%, from 29.4% in the same period a year earlier, while expenses declined to 19.2% ,from 19.9%. The retail segment recorded operating income of $753 million in the fourth quarter, compared with $726 million year-on-year, also benefiting from the extra selling week. For the 12 months, sales in Sears' retail segment edged upward, to $31.8 billion, from $31.5 billion the previous year. Operating income for the 12 months slid to $828 million, from $1.2 billion. Consolidated Sears revenue for the fourth quarter, including merchandise and credit and financial products, dropped to $12.3 billion, from $12.5 billion. Net income climbed to $2.7 billion for the fourth quarter, up from $848 million year-on-year. The most recent fourth quarter results, however, include a pre-tax gain of $4.1 billion for the sale of the company's domestic credit and financial products business, a pre-tax gain of $81 million for the sale of a tire and battery business and a $791 million pre-tax charge. Consolidated 12-month revenue was flat at $41 billion, compared with $41.4 billion a year earlier. Net income reached $3.4 billion for the 12 months, compared with $1.4 billion year-over-year, but the most recent year's results also were affected by the pre-tax gains. Did you know? Spending on computer hardware and software by wholesalers and distributors is expected to exceed $80 billion by 2008, up from about $53 billion in 2003, according to a study released by the Distribution Research and Education Foundation. The survey of more than 1,000 wholesale distributors found that executives plan to increase spending in four areas: online ordering, CRM, sales force automation and warehouse management systems. The study, “Facing the Forces of Change: The Road to Opportunity,” was conducted by Pembroke Consulting on behalf of the Distribution Research and Education Foundation. It examines the key forces affecting the supply chain. "In the coming years, distribution executives will invest in technologies that improve productivity, enhance existing service offerings and meet new demands for customer self-service in b-to-b supply chains,” said Adam Fein, President of Pembroke Consulting.

MTS, Inc., the parent of high-profile entertainment Retailer Tower Records, plans to file soon for bankruptcy protection after failing to find a suitable buyer. A Chapter 11 filing for protection from creditors by MTS would cap a long period of financial distress for privately held Tower, a chain of nearly 100 stores located mainly in the United States that sell music and video entertainment in various formats. The Chapter 11 filing will involve a major debt-for-equity swap that would likely switch control of the company from the founding Sacramento, California-based Solomon family to creditors that include bondholders and banks, sources said. Like other Retailers in the recorded entertainment industry, Tower suffers from stiff competition from mass market Retailers such as Wal-Mart Stores Inc. and high costs from retail leases. Digital downloading and file copying has hammered sales and led to widening losses, the company has said. The bankruptcy filing is likely to happen within the next week in Delaware, barring last minute hitches or objections from creditor groups working to hammer out the "prepackaged" bankruptcy plan. Most creditors appear to have agreed to the plan, sources said. The plan, which must be approved by a bankruptcy judge, won't involve significant store closings or employee layoffs, or even a liquidation, as some feared. But some observers say the long-term future of the glitzy store chain founded in 1960 is clouded, particularly due to competition from digital downloading, a medium that doesn't require expensive retail locations. "How do you compete with free?" asked William Brandt, Chief Executive of restructuring firm Development Specialists, Inc., referring to competition from Internet music downloading. "They need to look for an industry-wide solution to the problem which they failed to lead. A better solution has to be found." Tower teetered toward bankruptcy last year when it defaulted on $5.2 million in coupon payments on a $110 million bond issue. It then hired investment bank Jefferies & Co. to help negotiate with bondholders and Los Angeles-based Greif & Co. to help find buyers under a forebearance agreement from lenders. The year before, it sold its top-performing Japanese division for $129 million, but the sale failed to stem a loss of sales due to shifting consumer demands. In a regulatory filing last April, MTS reported debt of $441.9 million, including $194.5 million in bank and bond debt, along with $247.4 million in operating leases. Sales for the nine months to April 2003 fell 9 percent to $429 million, while losses rose 47% to $36.3 million, said MTS in the filing.

Sponsored By

RetailVision Spring 2004 By Pete Prentice, Event Director, Gartner Vision Events

With over 200 Retailers confirmed to date and more than 150 Vendors already signed up, RetailVision Spring 2004 will be sold out in the next few weeks. The inaugural CE Track is off to a huge start with enthusiastic confirmations from both the Vendors and Retailers.

Perhaps the most exciting aspect of so many major and emerging Vendors and Retailers participating in the Event is that RetailVision serves as a bellwether for the retail channel. More buzz and more excitement around the Event tends to mean more new products and more new companies hitting the market. That’s good news for all of us in the channel.

With all of the excitement brewing, the RetailVision team is working overtime to “one up” ourselves once again. While last Fall’s RetailVision Rodeo Welcome Reception was one of the best attended opening nights ever, we can’t wait to see the reaction when participants discover what we have come up with for this Spring. Who would imagine that you could ram your competitor on the Bumper Cars, check out the spectacular view from the 50’ Ferris Wheel with your favorite Retailer, and even win great prizes -- all while at a “business event”?

And that’s just the Welcome Reception! We have an all-star cast from “Whose Line is it Anyway?” and “The Drew Carey Show” lined up to entertain and present the “Best of RetailVision Awards”™. The Ingram Micro team is revved up for another outstanding (and perhaps even a little outrageous) Harley Party Wednesday night, while Levin Consulting is getting ready to host the fantastic RetailVision Golf Classic on Thursday.

From start to finish, our mission is to deliver an experience that goes beyond the traditional ways of “doing business”. We recognize that successful business interaction is based on relationships and with that in mind, everything we do to enhance the Event is focused on creating opportunities for relationships to emerge or be strengthened.

For the full RetailVision Spring 2004 agenda, as well as information on how you can still join us in southern California, go to www.retailvision.com.

Sony’s New Models and Takes Aim at Palm
By Sam Bhavnani, Senior Mobile Computing Analyst (ARS Research)

Earlier this week, Sony announced the U.S. launch of three new handhelds in the U.S. market; the entry-level PEG-TJ27, WiFi enabled PEG-TJ37 and the high resolution PEG-TH55, signifying Sony's desire to take on Palm's top selling models, the Tungsten E and the Zire 71.

Currently, Palm's most popular models account for over 50% of the retail market, while Sony holds a mere 20% market share. Recognizing the need to expand its market presence, Sony launched its 2004 models with a very strong consumer value proposition.

In the PDA market, ARS data demonstrates that three main factors are driving the handheld market in early 2004 and will lead Sony to success:

1. Price Point - Top two selling models (Tungsten E/Zire 71) are priced $149 and $249, respectively. Sony looks to take on Palm's market share by pricing its TJ37 at $299 and the TJ27 at $199.
2. Digital Camera - Palm's popular Zire 71 has an integrated camera. Sony is following suit and offering a digital camera in all three new models.
3. Wireless - WiFi handhelds have grown from 5% in December to over 10% in January. WiFi notebooks now account for almost 70% of the retail market and are a huge consumer hit. Sony's TJ37 and TH55 are both WiFi enabled.

In a product by product comparison, the new Sony Clie PEG-TJ37 features a 320x320 resolution screen and measures 4.5" x 3.0" x 0.53"; weighing only 4.9 ounces. It features integrated WiFi technology and carries a $299 price tag. The PEG-TJ37 operates a Palm OS Garnet on a 200MHz Motorola i.MXL processor.

The TJ37's top competitor, the Palm Zire 71, offers 16MB RAM, a 144MHz processor, a comparable 320x320 resolution and weighs 5.3 ounces, but lacks wireless technology, the latest must-have for savvy PDA users.

However, Sony's TJ37 must battle Palm's Zire 71 in market performance; the Palm Zire 71 release in April 2003 noted a huge price/performance advantage over other competing models and sold like gangbusters. Nonetheless, the launch of Sony's TJ37 will have the first-to-market advantage with several weeks before Palm releases its Spring lineup.

The new PEG-TJ27 is the successor to the PEG-TJ25 and is very similar to the TJ37 but lacks wireless technology and has limited audio/video (A/V) capabilities. The PEG-TJ27 features a 320x320 resolution screen and measures 4.5" x 3.0" x 0.53" and weighs a mere 4.9 ounces. It runs the Palm Garnet OS on a 200MHz Motorola i.MXL processor.

Compared to its closest competitor, the Palm Tungsten E, the Sony TJ27 offers a faster processor and an integrated digital camera, but lacks MP3 technology. Lined up side-by-side in a retail store, consumers will likely choose Sony's PEG-TJ27 because of the digital camera feature, double the memory, a faster processor and a slimmer design, while carrying the same price point as Palm's competing model.

The PEG-TH55 is Sony's first high-resolution (320x480) handheld with a traditional tablet design. The WiFi enabled TH55 runs the Palm OS Garnet on the Sony Handheld Engine, which offers a "speed-step" technology that varies the processor "RPMs" between 8MHz and 123MHz, depending on user demand. It has 32MB RAM and measures 4.9" x 3.0" x 0.6", weighing only 6.5 ounces.

A unique feature on this handheld is Sony's new proprietary application, the "Clie Organizer." The application replicates the basic PIM (personal information manager) organizer functions (Calendar, Address Book, To-Do List, and Memo Pad), but enables the user to add handwritten comments, icons and images to be attached and/or added to the appropriate pages.

In the retail wars, the Sony PEG-TH55 will also battle the Dell Axim X3i and the HP 4155, as well as Palm's Tungsten T3. The three devices all feature 64MB RAM and incorporate Intel's 400MHz XScale processor. The Dell and HP both run Windows Mobile 2003 and the Palm, runs the Palm OS. Sony's PEG-TH55 is the only model with an integrated camera. Its hardware features are not as powerful as the competitors, with only 32MB RAM and a slower 123MHz processor.

Incentives

To encourage consumers to 'buy now', Sony is offering customers who pre-order the PEG-TJ27, PEG-TH37 or the PEG-TH55 a free download of DataViz' DocumentsToGo Professional Edition v6.0, valued at $39, as well as a free box of Ethel M chocolates. Let's hope guys don't give the chocolates away and keep the new handhelds for themselves!

In 2003, Sony offered its innovative handhelds at too high prices and entry to mid-range devices that just "matched" the competition. The new product launch is compelling and will help Sony gain share in the handheld space.

RESEARCH


Evolution of PCs to TVs
By Ashley Domis, Displays Industry Analyst, ARS Research


It seems like every time you open a tech news article these days, there is yet another PC manufacturer jumping into the big screen HDTV industry. First, it was Gateway that announced its new 42-inch Plasma TV in the third quarter of 2003 at $2999, shaking up the holiday buying season. Analysts were skeptical that a PC manufacturer would even consider making the switch to start producing televisions. Although there were many missteps, Gateway’s first plasma proved to be a success - such a success that other companies have decided to get a piece of the “highly profitable” pie.

Dell and HP both announced their plans to jump into the television market recently. In the third quarter of 2003, Dell launched its LCD televisions in an attempt to give Gateway and other white-box manufacturers a run for their money, and currently offers 17-inch, 23-inch and 30-inch LCD televisions. HP announced its digital entertainment strategy at the 2004 Consumer Electronics Show and previewed its new 30-inch LCD TV and 42-inch Plasma Display; both are scheduled to launch in June. Even Epson America, known primarily for its printers and media accessories, announced its big-screen LCD projection TV with a built-in color photo printer. What will manufacturers come up with next?

So what is all the fuss about?

The outlook for Digital TV (DTV) looks promising. In 2003, total DTV shipments grew by 41% and collective revenues for LCD and Plasma TVs increased by 180%. The category is expected to grow another 33% in 2004 to $8 billion; a large part of this growth is expected to come from the LCD and Plasma category. Additionally, the Digital Direct View and Rear Projection (RP) TV market is expected to increase by 17%.

COMMUNITY

Changing Channels The Next Tech Revolution – An Opportunity By Steve Cross

Carr’s position is that IT is ubiquitous. As such, IT becomes transparent to the user, like a utility, or any other transparent commodity, like electricity, etc. He additionally points out that there is now as much IT power available as needed, that everyone uses similar machines and software to do similar tasks, and that the infrastructure build-out is over (or nearly so).

How does all this esoteric stuff affect each of us? A couple of ways. First, IT spending is going down, and will continue to go down. That seems to be guaranteed. Why should an IT manager, VP, or CIO spend money on incremental improvements when everything works okay already? That kind of scenario forecasts declining sales and revenues. That’s one effect. I would think that folks in the high-end IT market should start looking for other stuff to do, especially enterprise software.

Second, there is a new technology revolution brewing as the universe of users gets ready to start using the availability of the commodity. And every time a new revolution hits, we all win. Allow me to share a couple examples. When railroads went from 20 mph to 80 mph, the North American continent opened up commercially, producing (to date) the world’s greatest economic boom, and it lasted 50 years or so after the Civil War. Whenever a new technology becomes available as a commodity, huge industries are created.

Another example, inexpensive glass bottling of preserved foods made Napoleon’s marches across Europe possible. Prior to that, no one had been able to mass really large armies and march them away from their food supplies. Napoleon took his supplies with him. Remember: Napoleon’s major contribution to warfare was massed artillery (very personnel intensive) and realize that you can’t mass artillery and personnel without food for them. It becomes clear that massed artillery on the battlefield would be impossible without preserved food. Forage will not do. It seems clear that every time technology moves forward, there are novel ways of exploiting the technology into great opportunity.

I’ve been watching some moves in a relatively new technology called On-Demand computing. IBM is investing in that space at a record clip, and it is one of IBM’s initiatives for this decade. It’s a technology and approach that assumes IT is transparent, that it is a commodity, just like electricity, that you call up when you need more. Computing horsepower in this model is just like any other utility. If you are Fed Ex and you have a massive ad campaign breaking at Super Bowl Sunday, then you probably need a ton of bandwidth and servers. IBM and others believe that you should just order up what you need, easily, transparently, automatically. And when you’re done, it just switches back. A friend has seen it work multiple times, and ya’ know what? It works.

We already inhabit a universe where brand is all that matters in PCs, printers, peripherals, and maybe software. Guess what folks? Now the IT folks are joining us. Not a fun party for them, but it will be for us. And here’s why…maybe you won’t need a PC on your desk, maybe just a browser-equipped terminal, and your storage is somewhere in the virtual world, your processing power is also elsewhere, and all you have on your desk is a printer and a burner of some sort. Don’t believe me? That’s ok, I’m writing this at 33,000 feet over America’s heartland on my Palm Tungsten C (wireless disabled temporarily for flight safety). I’ll sync it to my PC when we land, edit it a little and e-mail it to my editor, Keith Newman.

Five years from now, I’ll unroll a polystyrene sheet, use the virtual infrared keyboard that projects on the airline tray, and beam it out to Keith on the fly. Folks, we’re at the beginning of a new revolution because of this on-demand stuff and nobody is better suited to start positioning this stuff than the channel. We will bring this stuff out to the world just like we brought out desktop PCs, CD/DVD burners, handheld computing, and a hundred other great technologies when they hit the application stage. This ought to be fun.

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

Editor's Note: Steve is a channel consultant who launches and fine-tunes channel programs. He has helped numerous companies to increase revenue and enhance their channel success.

e-Xperience in Software Sales 2004