Microsoft, Intel Execs Say Recession Offers Opportunities to Invest

LAS VEGAS (AdAge.com) -- Two common reactions to a recession: hunker down and cut back or use the opportunity to take market share with product development and marketing.

At the Consumer Electronics Show last week, some of the nation's biggest tech firms said they're choosing the latter in hopes of emerging from the recession stronger, even as they brought fewer staffers to the show and attendance was significantly off from last year.

It's a classic invest-during-the-downturn strategy but also a relatively safe one, considering that consumers are moving to digital products regardless of the current correction. "No matter what happens with the economy or how long this recession lasts, I believe our digital lives will continue to get richer," said Microsoft CEO Steve Ballmer, who attempted to set a tone of optimism early in his first whirl giving the keynote in place of Bill Gates.

He said the company would "continue to spend more than others" on research and development as it tries to establish Windows 7 as the linchpin of the convergence of the three screens people use each day: TV, PC and cellphone. And he argued that the recession gives devices running Windows a competitive advantage over more-expensive competitors, such as Apple. "At this time economically, when people are struggling to make every dollar count, the choice that most makes each dollar count is the PC," he said.

Intel CMO Sean Maloney echoed that sentiment, and said the company would use the opportunity to gain share for lower-cost netbooks. "Intel was established in 1968, and the philosophy since then, whenever we've had downturns and recessions, has been to invest during downturns as much as we do in good times," he said. "You need to recover using new technology. That's how you generate new cycles of purchases."

Not holding back
That's the message Accenture gave its clients at the show. "Our experience shows that in the early '90s, those companies who invested in the downturn came out of it flying and had a great late '90s," said Greg Douglas, global managing-partner of the consulting firm's media and entertainment practice.

Paring back isn't the plan for Michael Ahn, president-CEO of LG Electronics North America, who said, "In the current economic environment, we must press forward and work toward our goals." He added: "Of course, 2009 will be challenging in many ways. But I think this is an opportunity, too, for LG to differentiate itself from competitors, and I am positive about the future."

For electronics marketers, one silver lining of this particular recession is that it comes during a transition to all-digital content. For media and entertainment companies, Mr. Douglas said, managing in a fully digital environment can save up to 40% of its operational costs.

To be sure, the blanket of recession muffled some of the conference's usual bustle. The Consumer Electronics Association said it expected attendance to be down about 8%, although anecdotal reports -- and much-shorter taxi lines -- suggested it was down far more. All of that underscores what a tough year it will be for consumer-electronics and technology marketers, who ask consumers to buy expensive, often discretionary products.

"Generally speaking, we may have less dollars to work with, and we're going to have to work smarter and be more efficient and optimized. But consumer insights and research? We have not cut back that and will not cut back that," said Mike Fasulo, chief marketing officer at Sony, which brought 40% fewer people to the show this year. Sony's research has spawned a few pared-down, smaller versions of a couple of marquee products, including a tiny $200 HD camcorder and a $900 mini version of its Vaio laptop, both products that represented greater mobility and lower price points -- themes of many product introductions at the show.

But it wasn't all about smaller and cheaper. Some of the biggest product announcements out of CES were for a new generation of net-connected TVs that bypass the computer and set-top box to pipe films from Netflix or Amazon, widgets from Yahoo or MySpace, and music from Pandora or Rhapsody.

Palm rolled out its new Pre smartphone to wide acclaim, and while it hasn't announced pricing, early reports suggest the device will cost $399, a stiff premium over Apple's iPhone, Google's G1 and even the luxe BlackBerry Bold. If that's true, Palm is staking its recovery on the hope that gadget lust is more powerful than a stagnant economy. "Companies should make their products aspirational, and we're seeing a lot of aspirational advertisers," Mr. Douglas said.

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Palm saves itself (and maybe Sprint, too)
After years of little innovation, Palm rolled out its touch-screen Pre to almost universal gadget-hound acclaim. "There's little doubt that Palm is back in a big way, and that this device has the potential to make up for many of their missteps," wrote Ryan Block at Gdgt. Couple that with the fact it's being sold exclusively through Sprint, and it could be just the kind of double-resurrection story the media loves.

Android everywhere
Engadget's Nilay Patel loved GiiNii's Movit Mini Wi-Fi Android tablet, explaining that the operating system transformed a so-so tablet PC into a seven-inch version of the iPod Touch with Gmail access. It was just one of a number of non-phone products that are now running on Android, the open-source mobile operating system from Google.

PANS

Yahoo's connected TV
Yahoo and Intel stole the show this year with a new generation of web-enabled TVs and a platform for building "widget" applications that appear on the screen. CNet Executive Editor Tom Merritt said he likes net-connected TVs, but Yahoo's widgets, not so much. "It's a product that's neat and has a wow factor, and nobody will use it," he said.

Anything wired
It's 2009, but CE companies are still introducing products tethered by ugly cords. "Every year we are promised wireless home-theater products that don't seem to make it to market," said CNet Executive Editor Molly Wood. Key culprit this year: Samsung, which introduced a line of wall-mounted home-theater devices, wires included.