Wave Issue 0104 1/19/01 Article 2-02

***WAVE Comments - CES Assessment

In spite of spending 4 days walking the floor it was still not
possible to cover all that we would have liked. Many photos from
companies we have discussed, as well as ones we did not write
about have been published on the WAVE Report Web site.

www.wave-report.com/other-html-files/CES2001.htm

Three take aways:

1. The convergence of the PC and CE markets has not happened and
it is at least 3 - 5 years in the future.

Craig Barrett and Bill Gates were pushing the Extended PC that
connects all forms of devices in the home and makes the PC a
virtual home server. On the show floor very few products were
dependent on the PC. Based on the view from the floor, the PC
just does not fit this view of the market. The only cross over
product is MP3 but this is really about portable audio. From a CE
viewpoint the overlap is only with the Walkman category. MP3
certainly does not fit the audiophile in the home; those serious
in audio ignore it. Most of the claims of overlap come from the
PC industry and not the CE companies. The only firm to begin to
bridge the gap and have well recognized products in both markets
is Sony.

As the PC industry seeks to market to the broader consumer
markets it must rely less on what it perceives as the market
needs, from its vantage point, but more from the long history of
successful and failed consumer products. For example, the PC
industry still does not appreciate the role of price to the
consumer as a critical market shaping parameter. Another example
of converging the two markets is Sony's tablet. What other tablet
shows television on a wireless device in the home?

2. Innovations in the CE market is not about pushing PC concepts

An excellent example of this was demonstrated by MedTak
Electronics with their tracking devices. Fundamentally these are
notification devices. What is different is that the value comes
from what they do for consumers not their connection to the PC,
which they are not.

Further, given the innovations seen in booths and, in particular
with Sony and Toshiba, we wonder where is the PC innovation? In
context, the PC industry is old. It continues to tune and refine
products based on what it is very familiar with. Yet, we saw many
innovative and even proprietary products on the floor which have
the potential of opening new markets and, in particular, CE
markets. The PC industry is struggling to be a strong and
valuable contribution to the CE market, in spite of what Craig
and Bill said.

3. Wireless is Big in Consumer Electronics but it is Early

Consumer electronics can benefit greatly from wireless
technology. This has significant consumer appeal, even in the
audio market as we discussed in the report on 1394. Bluetooth has
taken on a near magic status. The Bluetooth session was standing
room only with 400+ in attendance. Yet, wireless technology will
also take years to mature into consumer electronics.

The fundamental shift in the CE market is the transition to an
all-digital product line. This is not the same as the shift to
using the PC in CE products or even putting computers in CE
products.