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Can Motorola crack flat-screen TVs?

The cell phone giant is ready to make the leap into selling flat-screen TVs, but may find it tough to get a foothold with so many big players moving into the market.

Motorola wants to leap into the flat-screen TV market with guns blazing, but with so many players moving in the high-margin area, the world's second-largest cell phone maker may find it tough to stake a claim.

"Let's call it the wild, wild West of the flat-screen TV market, where literally just about anything is going to go for a while," said Bob O'Donnell, a director at technology research firm IDC.

Motorola, unveiling its flat-screen TVs this week at the Consumer Electronics Show in Las Vegas, is attracted by the high profits and heady growth of the market, as well as the belief that the TVs will mesh with its cable set-top box products.

Liquid crystal display (LCD) flat-screen TVs are much thinner and boast wider screens and higher image resolution than traditional cathode ray tube (CRT) models. Their popularity has soared as prices have fallen.

However, it's unclear whether Motorola--and other new players like Hewlett-Packard and Japan's Seiko Epson--can gain much ground against established consumer players like Japan's Sony, Sharp and Matsushita Electric Industrial, as well as Gateway and South Korea's Samsung Electronics and LG Electronics.

Demand for LCD TVs is growing fast. They made up only 2.4 percent of last year's overall global TV sales, but that is expected to hit 4.5 percent this year and 8.3 percent in 2005, IDC said.

As sales surge, prices and profit margins will drop, analysts said. O'Donnell expects the average price for LCD screens in the 30- to 39-inch range to fall to about $1,250 by 2006 from between $3,000 and $3,500 now.

Ultimately, price, design and marketing will determine winners, but with the market still in its infancy there is time for newer players to establish themselves, he said.

Starting in China
Motorola, which used to make TVs under such brands as Quasar before selling the business almost 30 years ago, is initially selling flat-screen TVs in the Chinese market, where its brand name is strong. From there, it will expand distribution of the TVs, which are built by its Hong Kong-listed partner, Proview International Holdings.

"It's very realistic to say that we think North America is the next entry point," John Burke, general manager of Motorola's cable unit's consumer business, said in a recent interview.

Some analysts believe it could enter the U.S. market this year. At this week's consumer show, Motorola will display 10 LCD TVs, in screen sizes ranging from 15 to 46 inches.

However, the Schaumburg, Ill., company, which gets the bulk of its sales from cell phones, has its skeptics.

"Motorola is playing an enormous catch-up game," said Charter Equity Research analyst Edward Snyder, who has a "market perform" rating on the stock. "They're very smart guys, but they have no history in it."

Burke remains "paranoid about the competition," but believes Motorola's experience in the cable sector, where it's the leading provider of set-top boxes, will allow it to thrive as consumers demand more high-speed Internet connections at home.

HP, which said last month it planned to show a flat-screen TV at CES, aims to sell more consumer electronics products as sales of PCs mature.

Epson, best known for printers, will show 47- and 57-inch high-definition LCD projection TVs with built in memory-card readers and photo printers. They also will come bundled with external CD burners and the ability to connect to a range of devices.

Story Copyright  © 2003 Reuters Limited.  All rights reserved.