Get Ready For An Innovative New Year

Feature-packed phones and PDAs are where the action is

Those of us who closely watch the technology biz are forever being surprised by how long it takes new products and new ideas to hit the mainstream. I have found the slow progress of high-definition TV and other forms of digital entertainment especially frustrating. The impediments to their widespread use have been as great as their promise.

As I look ahead to 2004, though, I think the stars are finally aligned for a wide range of entertainment products using PC and Internet technology, but delivered through consumer-electronics devices such as TVs and stereos. The most important development for HDTV has been the plunge -- by as much as half -- in the price of both flat-panel and projection displays. There are lots of choices below $3,000, though you can spend a lot more for a really good, big unit.

The other side of the equation is the growing availability of content. Satellite and cable systems are carrying high-definition channels, including both the HD versions of standard channels as well as such specialty programming as the HDNet sports channel. The consumer-electronics industry still has a ways to go in making HDTV easier to understand and simpler to set up, but the combination of more content and plunging prices should make it the hot product of 2004.

Music downloads took off in 2003 thanks to the wide availability of legal, downloadable songs pioneered by Apple Computer Inc.'s (AAPL ) iTunes Music Store. The trend will accelerate in the coming year, but look for a price drop from the going rate of 99 cents per song and a shakeout among the swelling ranks of online distributors. The big need here is a good and easy way to network a sound system so that music downloaded and stored on a PC will play on a standard stereo.

THE WORLD OF INFORMATION technology looks dull compared with the ferment in digital entertainment. Although 2004 should be the computer industry's best business year since 2000, this will be accomplished by companies and consumers armed with healthier budgets, buying many of the same products they found resistible this year. Intel Corp. (INTC ) caused a splash in 2003 with its Centrino processor, which dramatically improved laptop battery life while promoting the expansion of wireless networks. For 2004, the big, though relatively unexciting, news from Intel will be its Prescott chips, which will bring speeds of up to 4 gigahertz to desktops. Laptops will get faster, lighter, and cheaper. Desktops will get cheaper, and flat-panel displays will continue to slide in price, with quality 17-in. models heading for $350. Cathode-ray tubes will gradually disappear.

The handheld market will be more exciting. Phone handsets are adding features, and many can now sync contact and calendar information with PCs. PDAs with e-mail and phone capabilities, such as palmOne Inc.'s (PLMO ) hot-selling Treo 600 and Research in Motion Ltd.'s (RIMM ) BlackBerrys, are also improving, and their market share, while small, is growing. The result may be a market split between these bigger, more expensive products for those who want full e-mail access on the go and smart handsets, such as those based on Microsoft Corp.'s (MSFT ) Windows for Smartphones, or Linux for everyone else. Sales of conventional PDAs, such as palmOne Zires and Hewlett-Packard Co. (HPQ ) iPAQs, likely will continue to shrink.

What's most encouraging is that, after three tough years, the pace of innovation remains strong. The PC market is less interesting as those products mature, but in both wireless and consumer electronics, 2004 looks exciting. As always, I want to take this occasion to thank you for your interest and support in the year just ending and wish you a healthy, peaceful, and prosperous 2004.

By Stephen H. Wildstrom

    Before it's here, it's on the Bloomberg Terminal.