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Sonicblue to combine DVR, DVD player

The company hopes to fast-forward its digital video recorder strategy by adding DVD playback to its machines and creating a new low-cost lineup.

Consumer electronics maker Sonicblue is hoping to fast-forward its digital video recorder strategy by adding DVD playback to its machines and creating a new low-cost lineup.

The Santa Clara, Calif.-based company announced the additions to its ReplayTV digital video recorders (DVRs) on Thursday.

DVRs are similar to VCRs. But instead of recording TV shows to tape, DVRs store them on a hard drive. The devices can also pause live TV shows.

Sonicblue acquired ReplayTV last year, after the latter quit making DVRs and began to license DVR technology instead. Analysts had said that ReplayTV and rival TiVo were forced to heavily subsidize the hardware costs to make the recorders affordable enough for consumers. Sonicblue re-entered the DVR market in September with its high-end ReplayTV 4000 recorders for $699 to $1,999.

The company now asserts that it can successfully tap the low end of the market.

"By streamlining our supply chain and integrating various components in the boxes, we have reduced hardware costs enough that we can be profitable offering low-cost solutions," Sonicblue CEO Ken Potashner said Thursday.

The new recorders, which are set to hit the market in the second half of the year, will be similar to the ReplayTV 4000 machines but will have smaller hard drives and will feature DVD playback. Potashner wouldn't specify the price of the low-end machines but asserted that they will be below any DVR currently on the market. Philips, for example, sells a DVR with TiVo's service for $199.

Potashner added that the low end of the market represents a step in the company's overall plan to create a variety of consumer electronics products that can be linked together on a home network.

Yankee Group analyst Aditya Kishore called Sonicblue's change in strategy a surprise, saying that the company will need to drastically cut hardware costs to make money on low-end machines.

Sonicblue also plans to release a ReplayTV 5000 recorder, Potashner said. The 5000 model will become the new high-end product and will come with hundreds of gigabytes of storage and a service similar to video on demand. The 5000 recorder is expected out in the second half of the year.

The company hopes to double unit sales of ReplayTV recorders each quarter this year, which may be easier than it sounds. Needham analyst Andrew Scott estimates that the company shipped 3,000 to 5,000 units in the fourth quarter. Scott predicts that Sonicblue will ship 45,000 recorders this year, with the majority in the fourth quarter.

DVRs have been slow to catch on with consumers. Kishore estimated that so far about 600,000 units have been sold industrywide and that by the end of this year the total number should exceed 1 million.