Economic worries mar tech show's glitz

The world's major technology companies are trying to convince consumers they need an expensive, digitally connected home with the latest high-tech gadgets.

But there's a problem: an increasing number of consumers are having trouble just paying for the roof over the heads, much less a 150-inch television.

Few company executives at the annual Consumer Electronics Show in Las Vegas this week can avoid questions about the state of the economy, and the combination of a surge in the U.S. jobless rate, oil around $100 and a worsening credit and housing crisis has many on edge.

"The fourth quarter is full of strange, unanswerable situations related to unemployment, related to GDP, related to everything else," Sony Corp (6758.T) Chief Executive Howard Stringer said on Monday after a briefing at the show. "So it's too soon for us to be pessimistic, but I read the papers."

Electronics retailer Circuit City Stores Inc (CC.N) on Monday became the latest company to undermine the view of some analysts going into the holiday season that U.S. consumers would keep spending on computers, TVs, digital cameras and music players even as the value of their homes declined and foreclosures mounted.

Circuit City, hurt by a costly restructuring, said December sales at stores open at least a year fell more than 11 percent, and it expects to post a fourth-quarter loss.

More critical may be the report of December sales coming Friday from Best Buy Co Inc (BBY.N), the leading U.S. electronics retailer. It is expected to have done significantly better than its rival.

Executives at the show and analysts watching the industry's largest U.S. gathering said they feel confident about the current state of the industry. But they're uncertain about the rest of the year, when some economists expect the United States to slip into recession as the housing crisis worsens.

"We watch very carefully these kinds of general economy issues, and we do feel more and more concerned about the subprime issue and the impact on consumer spending and corporate spending," Jonney Shih, chief executive of Taiwan's Asustek Computer Inc (2357.TW), the largest maker of personal computer motherboards, said in an interview.

"Consumers are under intense pressure," added David Daoud, a personal-computer analyst at market researcher IDC.

"With the price of energy continuing to increase and a lot of people seeing the value of their houses dwindle, it will certainly lead to an amount of tension among consumers," he said. "The question now is, are manufacturers responding to that?"

SLOWING SALES GROWTH

An estimated 140,000 people are expected to descend on Las Vegas this week to check out the latest in consumer electronics. These include wireless Internet devices, a 150-inch plasma TV said to be the world's largest, leather-bound laptop computers and even a robot that cleans gutters.

Before the holidays, technology had been viewed as a safe haven for investors fleeing housing, banking and consumer-discretionary stocks. The Standard & Poor's information-technology index has added 5.6 percent in the past 12 months, beating the S&P 500's 0.5 percent decline and the Dow Jones Industrial's 2.6 percent gain.

But investor sentiment has changed in the past week, after British retailer DSG International Plc (DSGI.L) sent European retail stocks diving when it warned that full-year pretax profit would miss analysts' estimates because of falling desktop computer sales and weaker-than-expected laptop PC demand.

"The market dynamics will definitely change," Oh Dong-jin, president of South Korea's Samsung Electronics Co Ltd (005930.KS), told Reuters in an interview on Monday.

A series of recent analyst downgrades of technology stocks including No. 1 semiconductor maker Intel Corp (INTC.O) contributed to declining confidence in the sector.

The S&P technology index is down 7.7 percent in the past five trading days, making it the S&P's worst performing sector.

While many products at the Las Vegas show may never reach store shelves, collectively they serve to generate consumer enthusiasm for an industry that the show's organizer, the Consumer Electronics Association, expects will generate $171 billion in sales this year.

The amount is a 6.1 percent increase from 2007's total but less than last year's 8.2 percent surge, the group said on Monday.

Besides the technology, "the other overriding issue of focus is the state of the global economy, as CES serves as a crossroads for large companies from multiple geographies," Bear Stearns analyst Andrew Neff wrote in a note to investors. "Visibility remains limited."

Fears of a deteriorating U.S. economy and falling DVD sales helped drive Warner Bros' decision on Friday to exclusively back Sony Corp's (6758.T) Blu-ray next-generation DVD format, in a blow to Toshiba Corp's(6502.T) rival HD DVD format, a top studio executive told Reuters on Monday.

"We've typically been recession-proof," Warner Bros Entertainment Group President Kevin Tsujihara said at the Las Vegas show. "But the thing we saw in the fourth quarter ... was gas prices beginning to affect sales. And since we're considered an impulse purchase, it's beginning to impact us."

(Taken from www.tech.yahoo.com)

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Intel banks on another wireless gadget

Intel Corp. is betting on a big expansion of "ultra-mobile" computing, an idea that could hinge on how many gadgets people are willing to tote around.

In an interview Monday at the International Consumer Electronics Show, Intel CEO Paul Otellini said energy-efficient, Web-connected computers with full keyboards and screens in the 4-inch neighborhood can give people more of what they want from the Internet than cell phones can.

To help stimulate the technology, Intel plans in the next few months to begin shipping processors and associated "chipsets" that demand relatively little power and are smaller than standard PC processors, allowing them to be crammed into tinier devices, which would be built by other companies.

Eyeing a similar market, wireless chip maker Qualcomm Inc. also has built prototypes of little Web devices. Its chief operating officer, Sanjay Jha, said he expects manufacturers to take up the blueprints and begin selling what he calls "pocketable computers" by the end of this year.

So far, so-called ultra-mobile computers, smaller than average laptops but bigger and more fully featured than most cell phones, have gotten a tepid response.

With the devices' prices often beyond $1,000, many potential buyers have found little reason to scale down from their notebook computers or up from cell phones that have been improving their Web browsing experience.

"How do you make people realize that this is something advantageous to them and different from the notebook experience?" said Richard Shim, an analyst with IDC, a market research firm. "That's the trick. Nobody's been very good at that yet. ... It's not as widely compelling as it needs to be if they want it to compete on the level of a phone or a PC."

But Otellini said such distinctions will cease to matter, especially since small Web devices can incorporate cell phone functions. And he said Apple Inc.'s iPhone showed that combination devices can be elegant.

"You're projecting an end stage on an early technology," he said. "That's a risky thing to do."

To be sure, even with cell phones in nearly every pocket or purse, another gadget could be appealing if it does something particularly compelling. For example, more and more cell phones play music, but plenty of people also carry MP3 players that do the job better.

In a keynote speech Monday at CES, Otellini tried to show that ultra-mobile PCs — he prefers the name "mobile Internet devices" to better distinguish them from laptops — offer a new kind of information-on-the-go bliss.

He demonstrated how an American traveler to Beijing might use a pocket computer to get real-time navigation tips and instant translations of signs, menus and conversation from Chinese.

Otellini acknowledged that this vision for ultra-mobile computing might not be fully realized for a few years.

For one thing, little PCs need longer battery lives so people can tote them around and use them all day.

Intel also expects that wireless broadband networks based on the WiMax standard will develop much further to enable connectivity on the devices. But Otellini said the computers could also make use of cellular networks.

That is the connectivity route favored by Qualcomm, which is a major supplier to the wireless industry. Jha, the Qualcomm executive, said wireless carriers first will need to come up with more enticing data pricing plans.

Proof that wireless carriers will be crucial is in the weak reception for Sony Corp.'s Mylo handheld messaging device. Though it has a full keyboard and sells for around $300, it can go online only in Wi-Fi hot spots, which have limited range.

This is far from the first time Intel has ranged beyond its specialty in PC and server chips in an attempt to diversify — and take the edge off the up-and-down cycles common in the chip business. Past forays that hit dead ends include chips for music players, TVs and cell phones. Intel once even tried selling toy microscopes.

These days, some analysts fear Intel's inventory for PC chips is backing up because of slowing orders from the industry. Intel's shares fell 15 percent last week, vaporizing about $24 billion in shareholder wealth.

Intel also is eyeing home entertainment devices. Otellini introduced a computing-and-graphics-microprocessor combo that can run TVs and set-top boxes.

The company's goal with that product, called Canmore and due out late this year, is to make it easier for people to move Internet content to high-definition TVs.

Otellini said neither that nor the mobile Internet device venture is a mere side project.

"We don't make small bets on anything," he said.

(Taken from www.tech.yahoo.com)

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