Dell, the world’s leading seller of personal computers, confirmed last week that it would begin to sell a limited number of consumer electronics (CE) products and would be offering an online music service. The introduction of CE products, including a portable digital music player and a flat-panel television set, heralds a new strategy for Dell, which generates approximately 80 percent of its revenue on computer sales to businesses.
Although many questions about the product launch were sidestepped, the new CE products will apparently be supplied to Dell by contract manufacturers and re-branded as Dell products. The first wave of CE products includes:
The Dell Digital Jukebox, a portable digital music player reportedly supplied by Creative Labs.
The Dell W1700 LCD TV, which integrates a flat-panel monitor and a television tuner into one device, making it attractive for multimedia enthusiasts who want to watch TV and streaming video, play games, and utilize PC applications all on the same display device. The wide format 17-inch display can be used as either a television or as a computer monitor, is HDTV input ready, and features integrated speakers for high audio performance.
The Dell Axim X3, the company’s latest handheld device will be a thinner, lighter version of Dell’s Axim X5, and will also optionally offer 802.11b wireless connectivity.
The Dell 2200MP Projector is designed for home users to display sporting events, video games, or DVDs on a wall or screen.
In addition to the CE products, Dell also announced that it was starting its own online music service. The service, tentatively called the Dell Music Store, appears to be similar to Apple’s iTunes Music Store, and some sources have hinted that the service is simply going to be a separately branded version of Musicmatch’s online music service.
In response to questions about Dell’s music service, CEO Michael Dell said that he expected pricing to be competitive with other such services, and that the company has had discussions with a number of major music labels (note: Apple's iTunes Music Store currently charges 99 cents per song). The service will reportedly allow customers to download music to a PC, as well as to the company's Dell Digital Jukebox portable digital music player. It will also be able to analyze a customer's song-playing history and recommend new selections.
While Dell refused to reveal pricing information about any of its new CE products, the company said some of them would go on sale in a few weeks and the rest would be available before this year’s holiday shopping season.
Unsurprisingly, Dell’s initial plans are to offer CE products strictly through its web site. While most CE sales strategies rely heavily on moving products through retail sales channels, a Dell spokesperson underlined that the company would leverage its “direct-to-the-user” PC sales expertise in marketing its new CE products.
So why is Dell moving into the ultra-competitive world of consumer electronics? The short answer is that the continuing convergence between the PC and in-home digital CE devices makes it a logical market for today’s PC vendors. In fact, the better question might ask what took so long. After all, Dell competitors like Hewlett-Packard, Sony Electronics, Gateway, and Apple Computer have all made serious commitments to the CE market over the past several years (and in some instances, have had more success with their CE products than with their PC products). In that vein, Dell’s announcement seems to confirm that the line between the PC industry and the CE industry is becoming less distinct by the day.
Motorola and Sony Ericsson acknowledge that some new handsets will not ship in time for the upcoming holiday season - delays that will hurt the bottom line. The skinny: Motorola won’t have its V810 camera phone available for Verizon Wireless in time for the U.S. holiday season, and the E310, a color-display flip phone, will be delayed as well. Similarly, Cingular said it does not have Motorola’s camera phone for testing, putting its availability in doubt until at least mid-December. The scoop: Sony Ericsson will not launch its first 3G (UMTS) handset until early next year due to the need for more testing.
Our take: Motorola stands to lose the most. Camera phones are hot, and the fourth quarter is usually the busiest time for US carriers, with roughly 30% of new subscribers signing contracts.
Motorola has tried to play down the delays, saying it is well positioned for the holiday season with camera phones available in some other global markets, but also acknowledging “some variation in our introduction of certain new models.”
The harsh reality: Motorola is losing ground in the US to rivals like Nokia, Samsung and LG that already have camera phone models in subscribers’ hands. Motorola will be able to survive this setback, but it will suffer in terms of lost sales, and lost credibility with carriers.
Sony Ericsson will suffer less, since 3G handsets have not sold that well in any markets, and a delay won’t be as obvious. However, rivals like Nokia, Motorola and NEC have already shipped 3G handsets, and so Sony Ericsson is losing ground to early movers. Moreover, given this joint venture’s short history, this delay underscores an inability to execute on time.
For both of these manufacturers these delays are not good news. Even just a hint of delay sends the wrong message in the competitive world of handset manufacturing, no matter how much managers try to deflect the damage.
- Neil Strother - Senior Analyst, E-mail: nstrother@reedbusiness.com
In another tie-up between a satellite pay-TV provider and a telecommunications provider, France Telecom announced that it will partner with TPS to deliver TPS’ programming over France Telecom’s ADSL network. The TV over ADSL service will make programming available in real-time or it can be cached on the hard drive at the home for viewing on demand. Commercial deployment will begin in Lyon in December 2003 with Paris to follow in the spring of 2004. TPS, who will manage the subscribers, believes transmitting TV programming over DSL is the best way to reach households living in Multiple Dwelling Units (MDUs). In many cases it is too difficult to receive programming via satellite in an MDU because of the problem of attaching the satellite dish where it can receive the signal. Bell Canada believes this is the best MDU solution as well. The company sends programming from its satellite pay-TV platform Bell ExpressVu subsidiary over VDSL in several MDUs.
Other joint ventures between satellite pay-TV and telecom providers are likely in the next few years. Telecom New Zealand already bundles Sky New Zealand satellite TV packages with its telecommunications services today, just as SBC will do with EchoStar. Possible ventures include Telecom Italia, which owns a stake in satellite pay-TV provider Sky Italia, Telefonica with a stake in Digital+, and Korea Telecom with a stake in Skylife.
