Glitter, Crowds Down at Comdex

Everything about this year’s Comdex Fall exhibition, the tech industry’s mammoth trade show that kicked off here over the weekend, is a bit thinner than in years past.

Despite bargain hotel rates, the crowd is expected to be 25% smaller than it was in 2000. About 150,000 to 160,000 badge-toting attendees and some 2,000 exhibitors will be here looking for signs of a rally in the moribund tech economy, but most suspect they won’t find many.

That’s because they see little evidence that corporations and consumers are ready to start buying again. Instead, many technology industry executives say they expect only slow growth over the next year, with any big rebound to at least 2003.

“The job market isn’t very strong. People are delaying purchases,” said Joe Hartnett, chief executive of U.S. Robotics Corp., a leading maker of modems. Companies can’t exert much control over their fate “until there’s more confidence in the economy.”

Microsoft Corp. Chairman Bill Gates, who traditionally opens the convention with predictions for the future, is still a big draw, but not like in years past.

Sunday night he opened Comdex with a plug for the company’s upcoming Tablet PC, a laptop with a keyboard that can be detached or hidden when the device is used for taking handwritten notes.

Enthusiasm was harder to drum up, in part because Gates touted the same device a year ago at Comdex, when he demonstrated a prototype. In March, Microsoft announced five companies that had agreed to manufacture the product.

On Sunday, Gates listed several more manufacturers that had signed on, including NEC Corp., and showed off the first advance models by manufacturers. He also said software companies were beginning to optimize some applications for the devices, which will run a version of the Windows XP operating system and weigh as little as 2.5 pounds.

“Tablet PCs will greatly extend the capabilities of today’s laptop computers, allowing users to interact with their computer in exciting new ways and significantly increase the value of the PC in the workplace,” Gates said. The final version of the device will be available next year, he said.

The heart of the fall Comdex show has long been corporate computer systems and related products, many of which have taken a beating this year. NPD Intellect, a technology research firm, reported that sales of computers, monitors, printers and scanners all showed double-digit declines in the first half of 2001 from the same period last year.

Not surprisingly, the computer industry also has weathered huge job losses this year. More than 25,000 jobs evaporated in October alone, according to Challenger, Gray & Christmas, a Chicago-based outplacement firm. “There’s still a huge question out there about what is going to drive people to buy another PC,” said Brian L. Halla, chairman of National Semiconductor Corp., a Santa Clara-based chip maker.

Although reviews of XP have been good, sales have been moderate. Retailers sold more than 300,000 copies of XP in its first three days on the market, which is about 50% more than Microsoft’s last operating system, Windows Millennium Edition, but about 25% less than Windows 98, NPD Intellect reported.

Sunday, Gates said sales have topped 7 million, but Microsoft didn’t break out how much of that figure comes from upgrades, which can cost as little as $20 for recent PC buyers.

Gates spent much of his time on the issue of computer security, saying he would devote more of his energy to making it harder to crack Microsoft programs and networks. Microsoft servers have proved especially vulnerable, and the company’s Passport system for processing credit card and other personal information was cracked earlier this month before the company made fixes.

Overall, Gates was typically upbeat about the role of technology in the economy, saying that just as Internet companies were overvalued during the dot-com boom, people now are being too downbeat about the strength of technology innovations.

With the downturn in the economy and consumer confidence, which has affected PC sales, people are asking “is tech played out?” Gates said. But, citing Winston Churchill, he said the temporary hurdles represent not the end of the tech revolution but merely “the end of the beginning.”

At Comdex this year more than in years past, the pitch of many tech gear makers is in the cost savings they can offer. Products that have broken through important price barriers, such as disc recorders and flat-panel displays, featured prominently.

Comdex’s focus has expanded beyond the corporate computer world to include mobile devices and applications, digital imaging and communications. There’s also more attention paid to consumer-oriented gear.

Sony Corp. Chief Executive Kunitake Ando, one of the keynote speakers at Comdex today, said, “I think that in the past we did not bring enough Net-ready type of products. But Sony is finally ready to introduce those [audiovisual] products which will be connected to the Internet without

That includes game consoles, personal digital assistants, digital cameras and camcorders and even a portable flat-screen TV, he said.

Whether consumers will rush to buy these devices is unclear. Sony is one of several manufacturers that have tried to sell stripped down, easy-to-use gadgets that can link to the Web or a corporate network, only to have them crash and burn in the marketplace.

Halla of National Semi, whose company will again sponsor a pavilion at Comdex dedicated to such gadgets, said that the missing ingredient is high-speed, always-on connections to the Internet. “As soon as we solve [that] problem,” he said, “everyone will have a half-dozen information appliances.”

But he shouldn’t hold his breath. The telecommunications industry is in a tailspin, and demand for broadband Internet connections has flattened after two years of prolific growth.

Even Gates acknowledged that broadband adoption has slowed dramatically and predicted that it will be four to six years before broadband connections reach a majority of American homes.

Mike Cannon, chief executive at hard drive maker Maxtor Corp., said, “It is an extremely difficult time for the industry because PC sales are down, and these new emerging applications really haven’t taken hold in substantial volume. But they will.”

Still, he said, “I don’t really expect to come away from Comdex with any different view of where the industry is. Until we see corporate [information technology] spending open up again, and until we see consumer confidence levels restored, we’re going to be in the depressed state we’re in.”