The tone at CES 2010 improved markedly from just a year ago. Most people encouraged by improving consumer demand and new product innovation. Tablets and eReaders garnered the most buzz.
Although navigating cab lines was surprisingly easy and attendance was likely down year-on-year, this year’s show was still a great success.
For many, tablets was the word of the day. Most tablets at the show were either in beta or prototype stage where dozens of tablets are expected to launch over the next six to nine months.
The value proposition of tablets centers on combining long battery life, broadband, a touch user interface (UI) and digital content access in a sleek, portable package. Although the hardware specs for these devices are impressive and advancing rapidly, it can be said both software and UI were lacking on most of the tablets on the floor. This is an area Apple is expected to shine reports Deutsche Bank in its report at this year’s Consumer Electronics Show when the Company announces its tablet offering in the coming weeks.
In fact, Apple’s pending tablet announcement garnered the most buzz among CES participants despite its absence. Deutsche Bank expects Apple’s tablet to be differentiated through software (App Store, digital media, hyperlinks…), advances in its multi-touch UI and content availability / access.)
Improving PC demand?
The mood at CES was generally upbeat as demand continues showing signs of recovery. PC demand, specifically, sounds particularly healthy according to Deutsche Bank which attended the world’s largest electronics conference. The bank also believes consumer notebook demand was strong through the holiday period. Although the mix shift to lower-end models and discounting continues, unit growth is improving and channel inventories appear lean.
The investment bank revealed in its report it believes price / mix erosion continues due to netbooks and the related ‘trade down’ substitution effect. In addition, PC strength is being driven primarily by consumer notebooks (which have lower average selling prices than corporate notebooks).
The bank says a few contacts also indicated corporate PC demand is showing early signs of recovering as well and indicated if this strength continues, its recently raised PC unit estimates (+10% and +12% in CY10 and CY11, respectively) could prove conservative.
Inkjet printer unit demand also sounded better on the margin, due in part to discounting. In particular, discounting in the inkjet multi-function printer (MFP) market appears to have driven a pickup in unit placements and decent holiday unit sales for most major vendors. For example, channel checks for the bank indicated Kodak’s low-end MFP was discounted significantly at Walmart ($69 vs. $99) and sold out over the holidays.
Despite better printer unit shipments, Deutsche Bank revealed in its report overall home print volumes have yet to recover. More than one printing contact for the bank indicated that inkjet pages are being cannibalized by ‘soft’ output such as LCD frames, Facebook and email.
Tablets, eReaders and more
In aggregate, Deutsche Bank described most of the new technologies on display at CES as evolutionary. Within the computing space, the segment that generated the most buzz was in the tablet / eReader / slate space.
Most of the products reviewed by the bank were prototype products running ARM + Linux / Android (or a Kindle knock-off). Deutsche Bank says it met with several component companies who expect significant new tablet launches in the coming months.
The bank expects these devices to cover the spectrum in terms of screen size, form factor, capacity… In addition, there is significant development activity in this market segment that will likely translate into many new product launches in the second half of 2010. Perhaps this electronics category has the potential to expand the overall PC market?
The argument for primary initial use in the tablet / eReader /slate segment is focused on consumption of media and on-line content. However, the bank believes the product’s utility could be expanded materially with advances in display technology and software development (gaming, ebooks, education, medical…).
Future of tablet /eReader market and Apple’s influence
Ultimately, Deutsche Bank expects the tablet / eReader market to converge into a single device that incorporates full color video, eBooks, magazines, gaming, web-browsing and iTunes-like functionality.
However, most of the products at CES fell short of combining these hardware specs with an easy to use, intuitive UI and content. Many believe Apple is uniquely positioned to fill this void.
Although Apple does not directly participate at CES, its influence was felt everywhere according to Deutsche Bank. Many vendors were promoting their iPhone apps, iPhone interoperability or iPhone skins. In fact, there was an entire section devoted to iPhone and iPod accessories. Perhaps more interestingly was the persistent talk speculating on Apple’s forthcoming tablet / slate announcement.
Although Dell announced and briefly demo’d a tablet, the big news of the week was its announcement to ship its Android smartphone through AT&T.
Deutsche Bank tested the Android smartphone at CES and came away with the feeling although it’s no iPhone killer, it does expect the Android to be positioned towards more cost-conscious consumers and compete well vs. Motorola and HTC.
In the bank’s view, Android’s design and overall aesthetics are very attractive for a first-generation effort. Dell has also differentiated the Android OS with a unique front-end user interface. Sizing Dell’s Android opportunity, Deutsche Bank expects a relatively muted impact to Dell’s financials from its smartphone effort in the near-term.
However, it is believed the smartphone opportunity for Dell could be a meaningful financial driver over the medium-term (2 to 4 years). Even modest penetration of the large addressable smartphone market (roughly 175 million units in 2009 to 500+ million units over the next 3 to 4 years) translates into significant unit volumes (5% share of China + Brazil is 27 million units), according to Deutsche Bank.
Deutsche Bank, VentureOutsource.com, 2010
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