2000 Ad

Brandweek, Nov 20, 2000 by Todd Wasserman

The weather in Las Vegas was unseasonably cool for Comdex Fall 2000, the mother of all computer trade shows, but what really chilled the show's typical Brave New World rhetoric was a stiff breeze blowing in--from Wall Street. In a bit of bad timing, Hewlett-Packard reported that it missed analysts' quarterly earnings targets by a dime on the same morning that CEO Carly Fiorina was addressing show attendees. Fiorina made only a passing reference to the news, preferring to talk about HP'S next generation computing and services. Dell CEO Michael Dell, whose company's stock has been battered of late, joked in his address that his friend, president-elect-maybe George W. Bush and he could both "use 25 points right now."

In talking points, Dell and others sought to portray much of the post April Nasdaq sag as a shakeout among the Pets.coms of the world--but not well-run companies like themselves--and welcomed the return to solid business fundamentals. Indeed, if old line computer companies are worried about their valuations, it has yet to manifest itself in ad spending. Apple and IBM (neither of which attended this year's show) have scaled back their fourth quarter TV spending (Mediaweek, Oct. 23), but they seem to be the only ones.

Dell, for instance, is planning two ad campaigns for the next few weeks. One, via Lowe, Lintas, New York, will be the company's first network (rather than cable) buy Creative, breaking today will continue the "Dell4Me" motif introduced last year. Dell is also planning an extension to its branding campaign, via BBDO, New York, positioning the company as an e-business solutions provider. Also, HP is said to be upping its $200 million ad budget with fresh creative hitting next month via Goodby Silverstein & Partners, S.F. Microsoft, meanwhile, is planning a huge campaign next month to supplant its Business Internet effort from last year, according to Mich Mathews, vp-marketing. McCann-Erickson-San Francisco/New York, handles.

In the trenches, however some are throwing around the "R" word (not "recount," but "recession"). Stephen Dukker, CEO of eMachines, the low-end desktop PC brand, confirmed what Wall Street analysts have been saying for months, that PC demand has sharply fallen off because the economy has slowed down. "The first to stop buying were the lower-income consumers," Dukker noted. "The softening has been more on the low-end than the high end."

PC Data, Reston, Va., said August marked the first time that PC volume actually decreased year-over-year. While the average selling price of a PC has risen slightly Dukker said that's more a function of a lack of supply of low-end PCs than an increased preference for higher-ticket machines.

Bruce Greenwood, product marketing manager for HP'S Pavilion desktop PCs, however, said the "margin pressure" cited in HP'S warning to analysts must be from somewhere else, "In our part of the world, things are going well," he said, pointing to internal research showing 62% annual unit growth.

An HP distributor attributes some of the sales gains to the fact that HP has regularly included CD-RW drives in its models, while rivals, especially Compaq, have not.

HP took a similar approach in notebooks, a category where the vendor has literally gone from zero to No.2 in about a year. HP'S key strategy was to hit sub-$2,000 price points with its DVD models ahead of the rest of the market. High-end notebooks are typically geared toward business pros, but Bob Nitzberg, retail category manager for HP'S mobile computing division, said that DVD is "not being used for business applications right now." Instead, DVD notebooks are being used for things like pacifying kids in the car backseat with feature films during long drives, he said.

HP isn't the only one to see DVD as a killer app for the midto high-end of the computer market. Dell is positioning its product line as a portal for the Internet and home entertainment via DVD. "We're very focused on making sure the PC comes to the home," said John Hamlin, vp/gm of Dell's consumer business. "Our strategy is to see what's relevant, what people actually use."

In another bit of sobering news, the Austin, Texas-based Netpliance will no longer manufacture the i-Opener, its Linux-based Internet appliance that was touted with a Super Bowl ad last January, due to an unworkable business model. Virgin also abandoned an Internet appliance giveaway with the Boxborough, Mass., Internet Appliance Network.

Intel, however, is undeterred in its quest to bring the Linux-based Dot. Station, a simplified version of a PC, to the mainstream in mid-2001. Gregory Welch, dir-global marketing for Intel's home products group, blamed Netpliance's failure on an all-in-one strategy positioning the company as a manufacturer, seller and Internet service provider.

Welch sees the market mirroring the cell phone industry. Intel will sell Intel-branded Dot.Station to ISPs, which will work out their own pricing plans. Retailers, meanwhile, remain dubious about Internet appliances. "They're in a troubled space," said Scott Reedy vp-advertising, sales and vendor marketing for Egghead.com. "They cost too much money and don't deliver enough performance."