January 5, 2009

Electronics Show Scales Down With Looming Recession

Despite the recent recession, the largest trade show in the U.S. will open this week in Las Vegas.

The International Consumer Electronics Show will temper the usual slate of giant TVs and gadgets due to the economic downturn, while many attendees wonder if the technology trade show business is past its prime.

"I'm talking to the companies who are sending people, and they're sending two instead of 10," said James McQuivey, a Forrester Research analyst. "It's going to be a shadow of itself."

The Consumer Electronics Association, which is hosting the event, is expecting the usual 2,700 exhibitors, but is lessening show floor space by about three football fields.

According to Jason Oxman of CEA, more companies are focused on meeting customers rather than putting on large displays.

Oxman expects more than 130,000 attendees, just below the 140,000 that attended last year.  He believes some companies may not follow through in sending representatives with the current economic climate in order to save money on airfare and hotels.

Many analysts believe companies at CES will be shifting focus from large, expensive gadgets, to small, greener, less expensive items.

Kumi Puri, of Accenture Ltd, expects the focus to be on areas such as video games, mobile devices, and navigation systems; all areas that continue to show strength.

"Those are the categories that really continue to appeal to the consumer ... they're at price points that are a little bit more manageable," said Puri.

Tim Alessi of LG Electronics Inc said his company will be showing 35 new LCD TV models along with other products.  He expects the number of employees LG sends to CES to be down from last year.

"We're still viewing CES as a major event for the industry and a launch point. That said, we still have a huge booth staff and a lot of dealer and partner meetings set up," Alessi said.

Alessi doesn't see the economic downturn being reflected in LG's product lineup, or in many other companies, partly due to consumer spending being strong until the later part of 2008.  Most companies haven't had time to adjust.

Consumers didn't begin to cut back on spending until the holiday shopping season, when the credit crunch became a fully-realized crisis. 

According to SpendingPulse, a division of MasterCard Advisors, U.S. sales of electronics and appliances fell nearly 27 percent from Nov. 1 to Dec. 24.

Analysts expect CES to be flooded this year with netbooks, small laptops in the $300 to $400 range.  The products appear to be gaining popularity, with some estimating the unit shipments to rise nearly 85 percent in 2009.

Nearly all PC makers except Apple Inc. will be showing a netbook at CES.  Analysts expect netbook prices to dip below $200 in 2009.

Overall, many expect the electronic gadget market to continue to suffer in 2009.

According to research firm DisplaySearch, sales of flat-panel TVs are expected to drop for the first time in a decade. 

Sony Corp. announced in December that they would be cutting 8,000 jobs and shutting down plants. 

Forrester analyst McQuivey believes the economic downturn will affect CES.

According the McQuivey, companies used to announce new products to launch later in the year at CES, but with today's media environment, it's more effective to put products on sale as soon as they're announced to capitalize on the media blitz.

"It's almost like the industry is starting to recognize that these large-scale events are not how you release products," he added.

Apple Inc. shocked many people this week when it announced that Chief Executive Steve Jobs would not be appearing at the Macworld Conference and Expo, and would no longer release items at the show.

"Apple is reaching more people in more ways than ever before, so like many companies, trade shows have become a very minor part of how Apple reaches its customers," the company released in a statement.

CES hopes to benefit from the reduced importance of Macworld.  The shows have traditionally been held near the same time, frustrating those who wished to attend both.  This year the expos overlap for a few days.

Soon after the Internet bust of 2003, many computer companies such as Dell Inc., Hewlett-Packard, and Intel moved from Comdex, the premier tech show at the time, to CES. 

The companies have remained with CES. 

Microsoft founder Bill Gates traditionally started CES with a keynote speech, but after withdrawing from active work, Chief Executive Steve Ballmer will take over the duty.

Ballmer is expected to release new information about Microsoft's new operating system, Windows 7, in Wednesday night's address.

Other keynote speakers will include John Chambers, Chief Executive of Cisco Systems, Howard Stringer, Chief Executive of Sony Corp, Craig Barrett, Intel Chairman, and Ford Chief Executive Alan Mulally.

CES hopes to weather the economic climate with major corporate involvement, and lack of competition in trade shows in the U.S.


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