Gadget rush

CNET News.com's Michael Kanellos warns that some smart companies are making some very risky decisions.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
3 min read
Dell, Hewlett-Packard and other PC makers are rushing into the market for consumer electronics. If history is any guide, it could be a mess.

For tech companies, consumer electronics is one of those things--like solar energy or a movie star with a record contract--that look a lot better in the planning stages. What could go wrong? Asian contract manufacturers have boiled the logistics and design down to a regimented procedure. Large manufacturers can get rock-bottom prices on components, and they have large staffs of engineers and sales execs who have proved their ability in the field.

Yet success has proven difficult. Intel, Gateway, Compaq and other manufacturers all came out with electronics entertainment gadgets in 2000, only to exterminate them a few months later.

Even established manufacturers have a difficult time. The same day that Dell came out with its portable music player and LCD TV, Sony announced it would lay off 20,000 employees.

Devising a hit product is, of course, an elusive art that involves aesthetics, branding, good timing, luck and--most of all--an intuitive, difficult-to-define grasp of human behavior. In the '80s Sony had a huge, fairly unexpected hit with the Walkman. The Watchman portable TV didn't do as well.

The Japanese giant is now tinkering with the home humanoid robot. Logic says these will fail. Intuition says they are kind of cute and a lot of people speak to their cat on a regular basis. Time will tell.

Companies, though, chronically underestimate the intelligence of the average person. The public flocks to a new item, and marketing departments convince themselves that society has plunged into a new chapter of civilization and, particularly, into an era they themselves are suited to dominate.

Companies, though, chronically underestimate the intelligence of the average person.
In reality, consumer electronic products pass through four rapid phases of life.

First comes fascination, when the breakthrough seems almost impossible to believe. Those who grew up in the '70s will never forget the first time they saw a Pulsar digital watch. They were priced at $2,100 in 1972, but were a far cooler fashion accessory than dingo boots. Haile Selassie and Sammy Davis Jr. both owned one.

Second phase is status. Eight or nine years ago, only a small segment of the population owned cell phones, and those who did would place them on tables or bar counters when in public, just in case the premier of France called and it had to be grabbed on the first ring. This custom faded out within a few years.

The third phase is habit. A product's popularity draws a plethora of manufacturers to the market. Confused, consumers gravitate toward a few select brand names out of familiarity or concerns about quality.

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Apple Computer's iPod seems to be entering the habit stage. The company's music player, which contains a 1.8-inch hard drive from Toshiba, remains one of the most popular portable music devices on the market, but it grew to prominence when Apple virtually had a near monopoly over the supply of small drives.

Now Hitachi and others are cranking out minidrives that will go into lower-cost players of about the same size and shape as the iPod. Some might even look better. Recognition and brand identity, though, will likely continue to fuel iPod sales.

Despite the difficult odds, PC companies could succeed with some of these new consumer electronics products.
After that comes the final stage, in which price rules all, and the thing that once defined the future is on display next to some open boxes of Armor All in a convenience store.

Despite the difficult odds, PC companies could succeed with some of these new consumer electronics products. Televisions with liquid-crystal displays solve one major household problem: They are far thinner than those with the traditional cathode-ray tubes. Computer manufacturers also understand the underlying technology, from years of selling LCD monitors. Consumers that need to economize can use an LCD screen for both TV and PC purposes.

But are disgruntled teens going to express their antiauthoritarian stance with an HP camera phone? Is there such a thing as a Dell lifestyle? These companies may not be the right candidate for the job.