Transitional Year

Every June, I look back and it seems to me that CES ended much more than six months ago. This year it is especially so with the amount of change that has occurred since we left Las Vegas in January.

As of this writing, retailers and manufacturers in this business are, to put it politely, in transition. Energy prices are higher than ever and the housing market is sagging in most of the country. While consumers love CE and major appliance products, sales growth, let alone profits and market share, are hard to come by. Convergence and consolidation have become the modus operandi of many. And while everyone complains about aggressive pricing, no one does anything about it.

During difficult times in the past, regional chains have always had their problems, but the difference this year is the national chains that are scrambling. Tweeter, one of the leading specialty A/V chains in the industry, filed for Chapter 11 protection last week. (See p. 1.) Circuit City has undergone store closings and layoffs once more, and will post its most recent quarterly report this week. CompUSA has cut stores and gone back to stressing business customers as part of its new strategy. RadioShack is now the darling of Wall Street with its cost cutting, but is still challenged to find a long-term merchandising strategy that works. And Rex TV posted good earnings in its most recent quarter, but it had to close stores earlier in the year and most of its profits came from synthetic fuel investments.

Wal-Mart is re-merchandising its CE departments to keep themselves as a major competitor in the market and is now going to carry Dell PCs. Dell, in turn, cut its workforce by 10 percent even though it posted positive results for its most recent quarter. While Matsushita and Sharp reported fiscal year gains, Sony posted a fiscal fourth-quarter loss and stumbled with PS3 even as its Bravia TVs continue to sell well. Sony wasn't alone, with LG and some other worldwide suppliers recording mixed results either for the year or the most recent quarter.

And, of course, mergers have been all the rage, starting with XM and Sirius. Harvey Electronics, in financial difficulty, made a deal to buy fellow PRO Group member MyerEmco. By the time you read this, JVC may or may not be sold by Matsushita. Planar bought home theater display maker Runco, Harman was acquired by Goldman Sachs and Kohlberg Kravis Roberts & Co. for $8 billion. And in major appliances, Whirlpool got what it wanted, Maytag, but in a classic case of "beware what you wish for," it is still trying to figure out how to make the newly configured company run profitably.

And I haven't even mentioned technology yet. Blu-ray and HD DVD are still battling and everyone in the TV business is talking about "Full HD." Apple will unveil iPhone at the end of the month and finally bring Apple TV to the market. Will they be half as successful as iPod? Who knows?

As you can see there are more loose ends and question marks hanging around the industry at midyear than were unresolved storylines in "The Sopranos" finale. Some will be resolved by the time the 2008 International CES rolls around. In the meantime, it should be an eventful second half.