July 19, 2006

Gadget Makers Set Sights on Holiday Season

NEW YORK (Reuters) - Summer heat turns gadget makers' minds to winter's chilly days, when shoppers buy millions of iPods and sleek TVs, but consumers may be lukewarm to this year's newest crop of gizmos.

As they vie for a bigger slice of a global market estimated at $135 billion, leading consumer electronics makers are already showing off their wares -- from advanced products such as Nokia's N91 multimedia mobile phone to novelties like iRobot's kitchen floor-cleaning robot.

But unlike recent years, when devices like Apple Computer Inc.'s iPod, satellite radios or digital cameras lured shoppers into stores, there appears to be few new "wow" gadgets to entice consumers to crack open their wallets.

What is more, rising interest rates and gasoline prices have analysts wondering if consumers may feel ho-hum about spending when the December holiday season arrives.

"I don't see the market being dramatically different this year," analyst Danielle Levitas, a Mountain View, California-based analyst for research firm IDC. "There are a couple of new products ... but outside of that, it will look a lot like last year."

Levitas said gaming would do well this year with the introduction of new consoles.


The Consumer Electronics Association, the industry's lobbying group, expects the global gadget market to grow 8 percent this year to a record $135 billion, fueled by demand for wireless devices, flat-panel displays, MP3 players and interactive gaming consoles.

But analysts say the growth will come from variations of established products, rather than ground-breaking new ones.

At last month's "Digital Experience" showcase in New York, where the industry tries to stir up excitement among consumers and vendors, gadget makers showed off everything from slender laptops to phones with TV-on-the-go and pocket-sized devices that play music and movies.

But beneath the din of the milling attendees, the tone of the show was tame, since many of the devices on display had already debuted at January's International Consumer Electronics Show, the industry's largest trade event.

Still unknown are the plans of Apple, whose iPod has inspired sales of sundry related items, including music CDs, headsets, and fashion carrying cases.

The same goes for the army of potential iPod rivals, such as Microsoft Corp., which is reportedly preparing to take on the device and its iTunes music download service with a year-end holiday launch of a wireless digital music player and software system.

Industry watchers and snooper Web sites suggest a new iPod is coming with a bigger screen, while Apple is always adding improvements to iTunes.

However, an executive at top U.S. consumer electronics retail chain Best Buy Co Inc. suggested there was a ceiling to Apple's ability to expand the market for iPods, which carry a premium price to rival digital music players.

"Apple has done an amazing job of creating a simple and easy to use (system) with iTunes and iPod," Michael Vitelli, senior vice president of Best Buy's consumer electronics division, told Reuters. "The problem I see is, how many more people want to spend $200 or $300 to listen to music?"


In the holiday season, Vitelli said: "Digital imaging, flat-screen TVs will be hot, gaming will rock, and notebook (personal computers) rock every week."

Reid Sullivan, vice president of the entertainment group at Panasonic parent Matsushita Electric, said the company had put a lot of effort into marketing home entertainment systems that include big-screen TVs and Blu Ray high-definition DVD players.

The players hit store shelves this year, along with rival HD DVD machines from companies like Toshiba Corp. and Microsoft.

"The center of the home will be large-screen plasma TV," Sullivan said, "but instead of just one product, we are opening it up to be a complete home theater (system)."

However because of the competing formats, with some movies available on one but not the other, experts do not expect significant sales of these players this year.

What will probably draw more attention is the introduction of new gaming consoles from Nintendo Co. Ltd. and Sony Corp. (6758.T). The companies are likely to launch these products with all the glitter of Hollywood movie premieres.

Analysts say each will sell 1 million to 2 million units as they join Microsoft's Xbox 360 on store shelves.

But even the buzz of video games has its ironic twist: Analysts say shortages of Sony's new PS3 and Nintendo's Wii, matched with declining sales of older consoles, will result in a market that is mostly bark, with little economic bite.

"It's kind of a wash year," said UBS gaming analyst Mike Wallace. "The industry is going to be flat."