The DVD market has nowhere to go but up this year...
Category-By-Category Previews For Retailers -- Need for Speed Seen Driving Sales This Year
01/05/98
Computer Retail Week
Page 01
Copyright 1998 CMP Publications Inc.
A CRW Staff Report -- New York-Under the glare of judicial scrutiny and high retailer expectations, Windows 98 is bound to be the product story of 1998, but don't expect it to steal the entire spotlight. Market watchers have high expectations this year for DVD -ROM, 3-D graphics, online gaming, faster modems and faster chips.
To be sure, the release-or delay-of Windows 98 will have far-reaching implications in the PC retail market this year. In addition to the anticipated spike from Win 98 upgrade and peripheral sales, software developers also are closely watching the Justice Department's ongoing tangle with Microsoft over the integration of Internet Explorer. And peripheral makers banking on its inclusion of drivers for technologies such as Universal Serial Bus are hoping for a long-needed fix.
But, Win 98 aside, some are betting this could finally be the year of DVD . DVD -ROM software development is increasing, and second-generation drives are winning acceptance among system OEMs and users.
Meanwhile, Intel's product and pricing moves throughout the year will drive the agendas of PC manufacturers and virtually everyone else in the industry, as speeds climb to the 450MHz level with a 100MHz system bus. At the other end of the spectrum, watch for sub-$1,000 PCs to gain new levels of computing power, with Advanced Micro Devices and Cyrix continuing to make gains.
Following is a category-by-category look at how decisions being weighed in boardrooms, clean rooms and courtrooms are likely to trickle down to the retail selling floor this year:
Software
Publishers of business and personal productivity titles-especially vendors of Web site tools, graphics software and utilities-will be anxiously awaiting the "gold," or finished Windows 98 code, so they can revise their titles to take advantage of the OS's new capabilities, especially the browser integration and USB functions.
Industry observers expect third-party retail software titles to be redesigned with a more Web-oriented interface than the existing Windows desktop.
Microsoft maintains it will release the OS upgrade in the latter half of Q2 with the integrated Internet Explorer browser, regardless of ongoing litigation with the Justice Department. However, several analysts aren't expecting the actual release of many new titles supporting the OS until late this year or 1999.
"A likely scenario is that Windows 98 won't be released until the third quarter," said Tim Bajarin, president of Creative Strategies, a consulting firm in San Jose, Calif. Bajarin said he doesn't expect shrink-wrapped Windows 98-compliant applications to be on shelves until year-end.
With or without the on-time delivery of Windows 98, it will be a banner year for several other software categories, such as more Web-centric sales-force automation packages and more powerful Web search engines, Bajarin said. Analysts also expect the voice-recognition category to gain momentum, including Microsoft's incorporation of more voice-navigation technology in a future release of Windows 98.
Also, retailers and small businesses should watch for the release of Windows NT 5.0 in the latter half of the year and the subsequent release of software titles, such as utilities, optimized for that system upgrade.
Microprocessors
Small and fast are the microprocessor bywords this year. Intel, along with competitors Advanced Micro Devices and Cyrix, is already moving toward a .25 micron manufacturing process. As a chip gets smaller (manufacturers previously produced CPUs using a .35 micron process) more transistors are packed closer together, so data passes through components faster. Tinier chips also result in a larger yield for chip manufacturers.
Intel next month will roll out a Pentium II chip at 333MHz. By the holiday season, Intel's CPU speeds should be above 450MHz, analysts and retailers have said.
AMD is also moving to .25 micron manufacturing. While the process means faster speeds, starting with 300MHz early this year, the key for AMD is the increased yield. So far, AMD has not been able to keep up with manufacturers' demand for its chips, and an agreement with Compaq Computer assures that the pace will only steepen.
In the meantime, Cyrix plans to increase its processor speeds to 300MHz early this year, as well as increase MMX instruction set processing speeds to 2x with a new CPU core.
Universal Serial Bus
This year should mark a breakthrough for the Universal Serial Bus. Industry analysts have said all new desktop-and most notebook-computers will support the technology. USB allows plug-and-play operation of nearly all input, output and peripheral devices in a single port, without the need for add-in cards or a reboot of the system.
By the second half of the year, 100 percent of desktop PCs and about 80 percent of notebook computers produced will include USB, according to Steve Whalley, Intel's connectivity initiatives manager, desktop product group, and a member of the USB Consortium, an industry group.
The outlook for 1998 shows most new monitors, joysticks and keyboards sporting USB by Q1, and the technology will be on other accessory and peripheral products by the end of the year, Whalley said. But the majority of printers and scanners will not support the new connectivity technology. In most cases, vendors will offer a few USB SKUs across their product lines.
Apple is also expected to begin supporting USB in 1998.
Connectivity
The wrestling match over 56K-bps modem standards consumed much of last year's focus, but 1998 promises to be different. With the 56K standard all but settled, analysts expect cable and xDSL technologies to usurp the cutting edge, even though 56K modems will monopolize sales.
3Com's foray into the cable market in the first quarter will likely spur others. The company's first cable modems will carry suggested retail prices capping off at $250. Those modems will offer one-way cable service at speeds of up to 38M bps, or roughly 1,000 times the speed of analog-based modems. On the receiving end, the modems will employ telephone-based technology for speeds maxing out at 56K bps. Cable modems featuring two-way service are likely to be introduced later in the year and only in limited markets.
3Com is not the only company with cable-based designs on the retail market. At the Western Show in Anaheim, Calif., in December, Toshiba, Samsung and others displayed cable modems based on semi-standardized technology.
Low-speed xDSL modems, which are based on standard telephone lines, will follow cable modems to retail later in the year. So far, the category is being led by Rockwell Semiconductor and partner Northern Telecom (Nortel). Full-fledged xDSL, which offers higher speeds, will likely be confined to field trials across the United States by telephone companies.
DVD -ROM
The DVD market has nowhere to go but up this year, as lower prices should allow PC vendors to include the drives in more models carrying lower price points. Analysts said the emergence of midpriced PCs with DVD -ROM drives will clear up murky consumer awareness. And the impasse between vendors and publishers shows signs of ending.
Michelle Abraham, industry analyst at In-Stat, Scottsdale, Ariz., projects worldwide shipments of DVD -ROM drives this year will be 11 million units, up from just under 1 million in 1997. U.S. shipments represent about 45 percent of the 1998 total, she said.
Software sales for the format are picking up, Abraham said, led by encyclopedias and print titles.
Entertainment software publishers appear less enthusiastic. Todd Coyle, senior vice president of consumer products at CUC Software, said CUC has some DVD products finished, but doesn't see much of a retail market until 1999.
Storage Products
As file sizes grow, demand for desktop and mobile storage and backup solutions is expanding. New products multiplied in 1997 to meet that demand. Avatar Peripherals introduced an SCSI connection for its 250MB Shark drive; SyQuest launched its 1GB SparQ; and Iomega popped out the ZipPlus. Castlewood Systems expects to ship its 2.16GB Orb removable storage drive in Q1 1998.
Sony joined the ongoing contest between Iomega and Imation to replace the 3.5-inch floppy disk drive in desktop and portable computers. Sony's HiFD, or high-capacity floppy disk, which offers a 200MB capacity and a 3.6MB-per-second data transfer rate, is expected to give Zip drives a run for their money this year-if Sony can convince enough OEMs to build HiFD into new systems.
Entertainment Software
Evolutionary strides in 3-D graphics and incremental advances in the quality of online gameplay will mark PC entertainment this year.
Intel is preparing a February promotional push for Pentium II's Accelerated Graphics Port chipset, according to Ubi Soft senior product manager Carrie Tice.
AMD expects to reach full production on its K6 3D chip during the first half, according to AMD director of technical marketing Lance Smith. That chip, designed with games in mind, increases the number of simultaneous floating-point operations an x86 chip performs, Smith said, enhancing the frame rate, lighting and shading that give 3-D games their effects.
Other improvements in online gaming have publishers optimistic about attracting new users. |
