PC vs. CE Page 3

Beyond their deep knowledge of hardware and software, computer companies are leveraging another of their strengths in the consumer-electronics marketplace: their agility. To survive and thrive in the highly competitive PC marketplace, companies have to excel at quicker product development and faster upgrades than most CE companies are used to.

Van Baker, a research VP specializing in CE at the consulting and analysis firm the Gartner Group, points to the rapid evolution of the iPod as a prime example of this kind of agility (and, some might say, brashness). "In 2005, Apple had the best-selling digital music player in the market with the iPod mini - it was at the peak of its popularity, and they shot it, replacing it with the nano," Baker says. "No consumer-electronics company would ever dream of killing its best-selling product at the peak of its popularity. But that's something PC companies do every day because they get new silicon, new software, new developments in the marketplace that allow them to refresh a product or bring a new product to market that makes an old one obsolete. Consumer-electronics companies are going to have to know how to do that, because digital technology is progressing very rapidly."

BRAND-TO-BRAND COMBAT Of course, it's possible to get products out too quickly - as anyone who's ever been rudely interrupted by the Blue Screen of Death while watching Lost on a Media Center PC can attest. As traditional CE companies are fond of pointing out, many PC companies are hampered by a mentality that there's nothing a little patch or another update can't do to fix an imperfect product.

"When Pioneer manufactures a DVD player or a receiver, it's designed to work out of the box," asserts Chris Walker, senior manager of Pioneer audio/video products. "On the PC side, sometimes things get released a little early. Consumers are more used to downloading updates and fixes in the PC environment, whereas in the living-room environment normally that's not the case." Adds Walker's colleague, Pioneer VP of displays Paul Meyhoefer: "Nobody wants to wait for Windows to reboot while you're watching TV."