PC vs. CE Page 5

But the promise of the totally integrated living room that both the PC and CE sides have been touting for years still seems a ways off. Smaller, nontraditional CE companies such as Elan, whose touchpad A/V equipment requires custom installation, have been picking up some of the slack. "High-end clients are looking for A/V gear to be tied together," says Paul Starkey, Elan's executive VP. "That's where I think most of the bigger companies have missed the boat. They're not tying things together as crisply as the 20 to 30 manufacturers that are working in the same space as Elan. Clients want the advantages of consumer electronics, such as the reliability, and they like the functionality of the computing environment. The frustration they have is that things are converging, but they're anywhere from complete at this point."

And frustration with the pace of digital convergence is likely to continue. In the days after Xbox's movie and music download service launched, users were complaining about painfully slow downloads (one blogger griped that it took him 2 days to get V for Vendetta), system crashes, and billing problems. "I Was Mugged by the Xbox 360 Video Store" read one headline on the tech blog Gizmodo the day after downloads began. "The system is getting hammered, and downloads are going slug-slow, or failing all together," wrote Gizmodo contributor Brian Lam. "The service stopped my movie download halfway, and wouldn't download more unless I bought it again. Then I tried buying an HD movie, which failed, but [it] took my cash anyhow."

To its credit, Microsoft promptly acknowledged the problems, offered the necessary refunds, and said it was working out the kinks. So it seems however innovative the PC companies might be in the CE space, they'll still be PC companies at heart - for better and for worse.

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