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Whitebox settles in the lounge

Whitebox settles in the lounge

Bringing the PC from the study into the lounge room is capturing the attention of large multinationals, large whitebox players and local mum and dad shops - and things are just getting started.

With whitebox solutions entrenched in the desktop market in Australia - and picking up steam in the notebook realm - players are now looking to the digital home arena for additional selling opportunities. Whitebox resellers are looking to push beyond the established education, government and SME markets.

In this emerging space, whitebox players can pitch a greater range of customised solutions, along with flexibility, simplicity and proximity to customers. Quick time to market as well as agility in configurations are typical strengths of the whitebox market.

Optima's executive chairman, Cornel Ung, said whitebox manufacturers, unlike the multinationals, were known for their strong relationships with the customer.

The strong bond boded well for whitebox players entering the uncharted home territory, he said.

Consumers could rely on technical know-how and quick service.

"Given the strong relationship, we can now start to take advantage of the convergence of IT and consumer electronic products," Ung said. "The big focus is how can we add more product in the entertainment PC platform."

In a bid to expand the computing-based business into new markets, the company has rolled out a consumer electronics division. The three areas include: display (plasma and TV products); mobile entertainment (including multimedia players); and home entertainment (DVD-RW and DVD recordable hardware).

And while Gartner said the local whitebox market (desktops and mobile PCs) accounted for about 45 per cent of the overall PC market, where these partners fitted into the digital home concept - and how they fared against the multinationals on that front - was not so clear and still a work in progress.

Gartner hardware and systems group principal analyst, Andy Woo, said the digital home space was on the Australian radar screen - although the country was a bit behind the eight ball given the long-anticipated release of the media centre edition - and vendors were rolling out application-specific gear to take advantage of the shift.

"There may be certain applications that are tailor-made to consumers," he said. "For example, with the click of a button, the digital player comes up. It gives you the ability to record programs and round up all of these different digital files."

In addition to new and improved applications, Woo said the hardware would become more funky and stylish, "The form factor may change because you're not going to bring your PC that's designed to be in the study or office into the lounge room," he said. "It's all about making it more user friendly for the consumer - and that means customising the hardware for them."

And while change was in the air, there was still a role for the PC reseller because although the gear would be smaller, it would maintain a PC form, he said.

An uphill battle?

Battling brand perception, sifting through a gaggle of standards and the subsequent confusion are just some of the challenges facing whitebox vendors wanting to crack into the integrated home environment. Ensuring the combination CE and IT products are easy to use and assemble - and not too overwhelming for consumers - is a major challenge.

Whitebox players must also keep their prices down - roughly 10 per cent lower than the branded big boys - in order to stay competitive and relevant to consumers, Gartner's Woo said.

"Some whitebox vendors may not be able to compete," he said.

"Can the whitebox absolve the price premium that a consumer will pay for a standard, mainstream PC? Whitebox vendors will have to pay close attention to their pricing strategy."

The tricky issue of digital standards was also a stumbling block, BCN Technology managing director, Ken Lowe, said. But it also translated into opportunities for the non-branded players.

"There are no firm standards at least for the next couple of years," Lowe said. "They are all fighting for them. In the meantime, whitebox manufacturers are flexible, can offer a quick turnaround and tailor the solution. While standards are forming, they can take advantage of it, deliver performance and meet the demand."

Given the complexity associated with the merge of IT and CE technologies, what can whitebox vendors do to take advantage of the shift?

Gartner's Woo said whitebox vendors would benefit from the rollout of the media centre edition (and the functionality associated with peddling PCs with built-in TV cards and bundled digital video cards) as well as the continued proliferation and demand for digital devices.

"Digital cameras, MP3 players, all of these different technologies are flowing onto the PC, which is the central server connecting the different devices and technology platforms - and this is where the whitebox players and resellers can help educate consumers," Woo said.

In pitching the media centre concept, whitebox players need to differentiate from Microsoft's major hardware partners by offering flexible solutions and services, he said. This would be difficult because many consumers felt more comfortable purchasing a major brand from a big mass merchant. IT resellers might need to offer a showroom type atmosphere so consumers could touch and feel the products and envision the integrated home concept, Woo said.

In the short term, the partner many also need to click up with an AV partner in order to combine their expertise (installation, cabling, infrastructure) in hooking up the technology on the home front.

"Awareness of digital PCs is still pretty low at this time," Woo said. "But where the strength of the whitebox comes into play is educating consumers that PCs are more than just a content creation device. It's about content creation and content access being meshed together."

Indeed, consumer and reseller education was needed on all fronts given the combination of CE and IT products. BCN's Lowe said that as the IT and consumer electronics marriage heated up, many of the products are coming from the IT side, which is ideal for the whitebox manufacturers given their expertise.

"The whitebox industry, as well as the PC players, is more familiar with the IT technology such as broadband, content information, the infrastructure, the connectivity, availability and functionality," Lowe said.

And as the shift starts to slowly transform the home, industry proponents are already busy envisioning the role of the whitebox manufacturer, and carving out product positioning plans.

Referrals and repeat business are likely occurrences for the whitebox resellers.

Optima's Ung said the whitebox notebook (dubbed the whitebook) was a likely fit for the lounge room, acting as a home entertainment unit or home gateway solution for the consumer. Connectivity was high on the wish list.

"To help the whitebox manufacturer be more successful, you need an emerging market and notebooks are one of the key products in this space," Ung said. "Everybody is talking about media centre products, but right now it's only available on desktop, and even here it's still in the initial stages (using a PC box, putting a tuner card in it with a media centre application).

"But as Intel and Microsoft get behind the whitebox manufacturers, and the ODMs provide whitebox

solutions, a whitebox notebook product with media centre features will be a key product for the whitebox market."

As such, he said common features of the whitebook media centre must include high-quality audio functionality, such as Adobe-compatible or home theatre solution (which is a hardware platform as well as a software application), as well as video performance that can provide high-definition TV output, along with DVD recording.

"We need a notebook where we can download high-definition TV broadcasting," Ung said.

"The notebook will have features with high-definition output, and will also be able to record news into the hard drive or a CD.

"That will be a fantastic concept so people can watch TV, DVD movies (which already exists), but also use the DVD burner to do the recording of the TV program so you can watch it after hours."

Ingram Micro's business manager for components, Danny Kwoh, said the hot product to focus on in the home space was the whitebook.

"A lot of whitebox manufacturers are trying to understand how to break into the market," Kwoh said. "With Intel's push of the Centrino and Microsoft's media centre, it's all targeted at the whitebox market. They are getting all the whitebox people excited about the space.

"At the moment, they are all looking for a strong supplier since many whitebox builders don't have the technology or the expertise to build the whitebook."

Whitebox desktop vendors can easily buy a PC case, a hard drive, the CPU, but have a hard time getting a barebone notebook case today.

"Resellers haven't got a clear picture about how to go about building the technology even though a lot of vendors are throwing ideas out," Kwoh said. "They are moving out of their comfort zone because they haven't done this before."

Important things to consider, he said, included getting access to the barebone chassis, as well as ensuring warranty services (which included a third-party repair centre) - and that was where the distributor came in.

As such, the company was rolling out two programs related to these areas in early 2005 to help local integrators get the ball rolling in the whitebook market.

And as whitebook vendors geared up for the home front, they were cognisant consumers wanted bigger hard drives, more memory and boosted graphics functionality, Kwoh said.

"Anything a PC can do, a notebook can do," he said. "But at the moment, notebook manufacturers haven't migrated the gaming functionality over to this form factor."

Once these and other functions are improved, Kwoh envisions the notebook will become the centre of the home. "The notebook could run your hi-fi system, the digital TV, the set-top box, the media centre, and literally combine the whole entertainment package from the touch of a button," he said.

New home habits

Ensuring wireless connectivity through the digital media receiver is another top feature that consumers will crave down the track. "Consumers can use a notebook to broadcast the news into other display units at home through the extender on the digital media receiver," Ung said.

Consumers would also want to use media centre notebooks as a storage unit, as an electronic photo album, or as a home gateway that connected other devices, he said.

"While this is now happening on the desktop side, the notebook side will see it early next year," Ung said.

"Since the whitebox manufacturer already has a strong relationship with the home user, there's a huge opportunity for them to provide a total home gateway solution."

Other entertainment PC products adding to a whitebox player's bag of tricks include portable digital media players (MP3 and MPEG 4 solutions, the latter takes the concept to the next level and offers up a colour screen, where users can play music and watch the news).

"For the whitebox manufacturer, because they are so dynamic, we can mix and match these products into the home - and there's a huge opportunity selling peripherals attached to the entertainment PC unit," Ung said.

"But it will take a while for the multinationals to adapt all of the products."

In gearing up for the digital home market, BCN's Lowe said the company had rolled out a host of product including digital TV solutions (digital TV tuner boxes and display products, as well as a VIA Nano platform which is suited for the digital home entertainment/automation market.

Digital entertainment devices were typically X86 consumer electronics systems for entertainment applications in the living room, Lowe said.

"The VIA embedded processor platforms are enabling a multitude of devices featuring small form factor, low power, quiet and silent operation to meet a variety of application requirements," Lowe said.

The local integrator could take the platform and design media centre-type products, he said.

"This product will allow the industry to further develop and tailor functionality for home automation, industrial automation, as well as for the digital home," Lowe said.

Other products the company is launching towards the convergence market include 3D graphic accelerator cards, barebone systems, optical products (DVD), digital still and video cameras, and wireless networking gear.

Pioneer, meanwhile, was also hot on the trail and launching its media centre PC in conjunction with the Microsoft release. Product manager, Jeff Li, said the last few glitches had been resolved. This involved work on the electronic program guides (EPG) and the digital TV tuners.

EPGs are driven by the microprocessor hardware and software in the set-top decoder box, although digital TVs will have this built-in.

Essentially, EPGs are interactive directory systems for locating programs.

Li said whitebox vendors could offer the whole package for the home environment.

"Set-top PCs, for example, is a key product," he said.

"It's a little bigger than a VCR, you can put it on the TV shelf, and it costs $3499 including an LCD TV."

But Lowe said if digital home solutions matured into a one-stop-shop solution - and adopted one standard - then the role of the whitebox manufacturer might be limited.

"If they become finished boxes, just like a printer, then I don't think the whitebox player has much to contribute other than selling it and storing it," Lowe said.

Conversely, selling components was the key, he said.

"But if the market requires a lot of modules available for individual functions, then the whitebox manufacturers can combine it externally into one solution, or internally put it into the box for assembly," Lowe said.

As such, integration, installation and support were essential services to be offered by the whitebox players, he said. Tri Benedict Software Engineering's Eric Kwon agreed there were many opportunities for the whitebox manufacturer. Chief among them was maintenance and support.

"Because there's software involved now, it's inevitable there will be problems," he said.

However, many resellers weren't ready to sell into the home market, Kwon said, and weren't clear that it was all about selling on support rather than price. Peddling home entertainment systems along with security gear were top selling opportunities in this space, he said.

"The possibilities are endless, but we're all trying to figure out where we fit in," Kwon said.


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