Captains Courageous - Twice

Captains Courageous

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The CE market seems to be plagued with bad news these days. With sales volumes squeezed, retailers struggling, longstanding categories on the edge of disappearing, layoffs, and the rapid decline of so many of the electronics markets iconic bands the drumbeat of negative trends can be overwhelming.

U.S. retail technology sales through April of 2012 (excluding Apple products) dropped 5% from 2011, which itself saw a 9% decline from 2010, according to NPD’s Consumer Tracking Service. In just two short years more than $5 billion in revenue has disappeared. One wouldn’t think that this is a great time for a brand to be venturing outside its core competencies into product segments that might seem to be a stretch. But yesterday we saw not one, but two companies (and fairly successful ones at that) take that optimistic plunge into new waters. Western Digital with its release of a family of high-speed home router equipment and Vizio, which introduced its new PC line in NYC, after its debut at CES earlier this year.

Western Digital has been the market leader in consumer hard drives for the past few years, leading the charge into the consumer storage market with 2.5 inch external HD designed to give consumers lots of storage and backup capability as their content explodes in the digital age. WD has been successful in the past, moving outside its comfort zone with its WD Live products. That product line targeted an emerging growth opportunity for digital media receivers at retail before Roku was available and Apple TV gained the traction it has today. And WD Live products remain successful today. But some may question the move into home routers, a market that isn’t high growth or emerging, but is populated with established brands and year-to-date has seen units decline 5% and revenue up less than 2% according to NPD’s Retail Tracking Service.

Throughout its history, Vizio has been a leader in flat-panel TVs. In some periods Vizio actually lead the marketplace place for LCD TV sales and shipments, but it always consistently placed in the top tier with a focused distribution strategy and a strong price/value image. Vizio, like WD, is not a stranger to trying to extend its brand to complementary categories. Soundbars, Blu-ray players, and HDMI cables are all product segments where Vizio has a strong presence today. However, Windows PCs are a far different market than HDMI cables, one with low margins, low prices, and entrenched aggressive competitors. During CES we noted there likely were too many brands chasing too little shelf space in the U.S. for Windows PCs, and nothing has changed in the ensuing five months to alter that fact. Yet Vizio has continued on and made clear its intention to be a player in the PC market.

We call both of these events out because it is a sign that WD and Vizio have confidence in the future, confidence in their brands, confidence in their strategy, and confidence in the CE industry. These two manufacturers haven’t just extended their lines, or shipped a slight upgrade to last year’s products but have moved into whole new categories, with a different set of competitors, and a different set of dynamics than their core consumer businesses. In today’s marketplace that takes real courage so let’s hope that these moves can kick start other CE companies into investing in future opportunities for growth instead of managing to avoid decline and failure.

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