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To LCD or to DLP

To LCD or to DLP

There are precious few pieces of hardware left in the IT industry that enjoy profit margins of between 25 and 40 per cent, but the LCD (liquid crystal display) projector is one of them. Of course, this neat little bonus doesn't come without its quirks, the foremost being that at $5000 to $7000 for a low-end unit and $20,000-plus at the high end, the product doesn't exactly sell itself.

Still, a culmination of factors has seen this hitherto mediocre technology thrust into the spotlight. Technology advances have seen projectors shed their clumsy weight and bulk of old and emerge with sleekness, portability, brightness and better resolution than ever. The price tag, while still a little hefty, appears to have reached a point of acceptability among consumers, opening the door to a host of vertical opportunities such as the home-theatre market where mid-range projectors are rivalling flat-screen TVs.

Meanwhile, rampant cost-cutting throughout the business sector has companies searching somewhat desperately for efficiency tools to help them stand out from the crowd, through more professional presentations and time-saving initiatives. And a sudden worldwide fear of flying has sparked an unlikely preoccupation with communicative multimedia and PC peripherals.

In addition, Mike Pleasants, marketing director for Epson Australia, says projectors have become more user-friendly, which has encouraged people to start using them in pubs, clubs and churches as well as a renewed confidence in the traditional business avenues.

"The maturity curve of projectors is similar to that of VCRs," says Pleasants. "To date, people have not been comfortable with them and needed a lot of help using them.

"Now, they are not too difficult to understand. If someone can sell a PC they can sell a projector."

Trickling through the channel

The opportunity for broader sales has seen projector manufacturers strike agreements with new distribution channels, including PC suppliers such as Tech Pacific.

"Projector products have very much moved away from the traditional office equipment and video specialist markets," says Lorraine Cowan of Tech Pacific.

"Our mainstream IT vendors such as Toshiba, Compaq. NEC, Sony and 3M are all offering lighter, more portable, lower-priced products with IT-style add-ons such as digital cameras and memory functionality."

Cowan feels there is an opportunity for IT resellers to capitalise on the projector product segment. "Some IT resellers have been able to add this product to their customer shopping lists in the corporate, SME and education markets," she says.

According to Tom Squillacotin, business manager for LCD products at Hitachi Australia, the IT channel is attractive to vendors, not only because of the complementary products they sell, but because of their market coverage.

"Manufacturers want the IT resellers for their contacts at different levels [of the marketplace]," says Squillacotin. "At the low end of the market in particular, it is too hard for the vendors to get adequate coverage selling direct."

Pleasants adds that resellers also have the ability to tease out specific uses for projectors within their customer base by leveraging their understanding of their clients' operations.

Hitachi's recently launched on-glass projector is a specific application of LCD that is carving a niche in the multimedia display market and is being picked up by traders for window displays and advertising. It utilises a tint-type film over the display window and has automated key-stone correction so the projector can be placed discreetly to the side of the room while the image remains square.

The vendor claims real estate agents have been among the early adopters of this technology, using it to replace the myriad of flyers in their front windows, and the product's possibilities are continuing to generate interest in the channel, tempered only by its $14,000 price tag.

Pushing high-value items

There are, however, mixed feelings about the success of this strategy. Ian Lowe, product marketing manager for Sony Australia, feels that at $5000 a piece, projectors require a certain commitment to make it a profitable addition to an IT reseller's business.

"They're sort of like a high-end hi-fis," says Lowe. "They need a certain type of sales technique because they're high-value items."

Lowe says the time required to lead the customer through the pros and cons of the product means that sales are still dominated by AV (audiovisual) specialists, who have about 60 to 80 per cent of the market.

Renee Bassal, product manager for projectors at Compaq Australia, argues that this does not apply across the board. "At the bottom end of the range, projectors are low-involvement products," she says. "All the reseller has to do is show [the customer] how it performs."

However, the time involved in demonstrations is exactly what resellers want to steer clear of, according to Jason Su, business manager for projector and plasma products for Acer Communications and Multimedia Australia.

"PC sellers don't want to invest too much effort in the sale," Su says. "They want people to buy off spec like they do with computers."

But before this can occur, the price point will have to drop significantly. Jeff Li, managing director of white-box PC builder and services company Pioneer, feels projectors will be a great complement to a mobile solution but will have to come in under $2000 before they can hit massive volume.

"We're still looking for something cheaper with about 50 per cent of the functionality," Li says.

IDC analyst Eric Haruki says there is no doubt that the price will decrease further, but with it will come the inevitable pinch in margins.

Haruki says the steady decline of average selling prices, from the current $5000 mark to a predicted $2500 by the end of 2005, will temper overall revenue growth, "even though worldwide unit sales will see a compound annual growth rate of 24 per cent from now through to 2005".

With this in mind, Pleasants says the channel has a good two years to reap the benefits of the projector market and its sweet margins.

From a growth standpoint, Haruki predicts the Asia-Pacific region will be one of the strongest over the next five years. "Starting from a relatively small unit base of 29,400 units, that region is expected to grow into a 124,000-unit market by 2005, for a 43.3 per cent compound annual growth rate. Despite lower selling prices, the Asia-Pacific region should enjoy projector revenue growth in the order of 28.3 per cent until 2005," he says.

As vendors attempt to reach these projections using increased market saturation, Squillacotin says the channel's strength is its relationship with customers. "Resellers' ability to tap the large service fee and profit margins depends on how they build up their expertise and credibility."

To LCD or to DLP

- DLP (digital light projector) and LCD technologies are both playing catch-up in their own way.

- LCD uses panels to separate the primary colours in the image and is said to give a "truer" impression of tones and shades.

- DLP uses a reflective chip with tiny mirrors on it, which allows it to be miniaturised more effectively for ultra-portable units and is often said to produce a brighter image.

- Despite the belief that the arrival of DLP would quickly see LCD lose market share, the latter still accounts for approximately 90 per cent of the projector market.

- DLP tends to be a more expensive alternative to LCD because the chip technology is licensed to US-based firm Texas Instruments, and requires a royalty to be paid.


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