Technology to watch in 2002

As a tumultuous year for the technology industry – and the world – comes to a close, we turn our attention to predictions for 2002. Discussions with experts, both in-house and industry-wide, produce a major theme: consolidation.

One or more major PC vendors will swallow up a competitor, or simply vanish, by year’s end, predict our experts. That’s the most dramatic example of consolidation, but watch for it with technology products as well. And the expectation of a shrinking roll of vendors comes in addition to whatever happens with the fractured merger plans of Hewlett-Packard Co. and Compaq Computer Corp.

“Clearly the market doesn’t support the number of vendors who are in it,” says Rob Enderle, research fellow with Giga Information Group Inc. “Whether it’s consolidation or some vendors leaving, we’ll see it. We have too many folks and not enough sales.”

Such industry upheaval can make it tough on consumers, who may enjoy lower prices but who aren’t sure which companies to trust, Enderle says.

“Consumers need to be worried about who is going to cover those warranties,” he says. “They want to buy from stable, diverse companies with no clouds hanging over them.” It’s even more challenging when even once rock-solid companies are experiencing problems, Enderle adds.

While most of the technology industry slumped dramatically in 2001, digital camera sales increased, and analysts expect that to continue in 2002.

InfoTrends Research Group estimates 6.4 million digital cameras were sold in North America in 2001. Estimates for 2002 put sales at 7.9 million, despite the economic downturn, says Michelle Slaughter, analyst.

In 2002, new camera buyers will be able to get more for their buck, she says. For example, the entry point at the beginning of 2001 was a 2-megapixel camera for about US$299, a good value on a very basic, point-and-shoot model, she says. Heading into 2002, that same type of camera sells for at least US$100 less, she says.

Entry-level buyers won’t be the only ones having fun, either. People interested in higher-end products will find some nice bargains too, says Grace Aquino, PC World associate editor and digital camera expert. As examples, she cites the 3-megapixel Olympus Camedia C-3020 Zoom priced at US$499, and the 5-megapixel Nikon Coolpix 5000 at US$1100.

Other upcoming trends include smaller and thinner digital cameras (following Canon’s lead); cheaper, low-quality sub-US$200 cameras; and digital cameras with extras such as MP3 players.

As more home and small office users turn to broadband, and more people bring home their second or third PC, home networking is expected to have a banner year in 2002 – and economic downturn be damned.

All it will take is for PC users to understand the advantages, says Dominic Ainscough, analyst with consumer market convergence at the Yankee Group. It’s not the conflicting standards that are deterring adoption, but the need for people to realize what they can do with a home net, he says.

“The bottom line: Most consumer don’t care about technology,” he says. “What they do care is what is going to be carried over the network.”

And what will that be? Shared Inernet access, files, and maybe printer access. Most people won’t build a home network simply because of great entertainment options -that will come later, Ainscough says.

Yankee doesn’t expect any one type of networking standard will become the top dog (although today Ethernet still reigns supreme).

“Yankee believes that the home net will evolve into a hybrid that will use multiple types of nets,” Ainscough says. “We will have some phone line, some power line, some wireless.”

That said the various wireless networks would find a larger audience as standards improve and more people understand their value, he says.

“Wireless options will penetrate at a faster rate than wire line. It speaks to the true value of the network, and allows for true mobility of your data,” he adds.

With PC vendors fighting to stay alive, you shouldn’t expect many radical changes in the PC this year. However, evolution – such as faster processors, larger hard drives, and better optical drives – will continue.

Enderle says one introduction of particular note will be modular computing. On the drawing board for years, modular computers will be rolled out this year by at least one major vendor, he says. The units use a handheld-size PC core that you can transfer from desktop to notebook to PDA (personal digital assistant) -type form factors.

Beyond that, Enderle expects few major improvements beyond increasingly smaller desktops and continued reduction of legacy ports.

On the notebook side, he expects even fewer changes aside from a growing number of users favouring lightweight notebooks over today’s more popular desktop replacement models.

And the much-hyped 2002 release of tablet PCs based on Microsoft’s special version of Windows XP? Enderle says he’s not impressed. “We have no indication that the market wants that,” he says of the tablet form.

“It’s a case of senior executives at Microsoft saying it’s a smart idea, but nobody is talking to customers. Sometimes people get together and cook up an idea that doesn’t matter.”

Our experts predict further consolidation from related industries such as CD-RW (compact disc-rewritable) drive vendors and Linux distribution vendors.

“We expect consolidation of the CD-RW drive vendors. There are too many on the street now, and the margins are too thin,” says Melissa Perenson, associate editor and CD-RW-drive maven at PC World.

Oversupply caused CD-RW drives to drop dramatically in price over the last year, and it’s made life difficult for vendors. Both Hewlett-Packard and Iomega – two of the top five vendors of internal drives – have announced a plan to stop making internal CD-RW drives, she says.

Going into the new year, companies like TDK, Philips, Sony, CenDyne, and Pacific Digital will be anxious to fill the consumer retail void left by HP and Iomega, so prices should remain attractive, she says. And vendors will continue to improve the technology, with 32X rewrite drives appearing soon.

The small but vocal world of Linux will see a change this year too, as a long-overdue consolidation of Linux distributions occurs, says Matthew Newton, manager of editorial applications development at and staff Linux brain. It’s likely one or more major distributions will fold, and major player Red Hat will likely buy another, he says.

The arrival of Sun Microsystems’ StarOffice 6.0 and continued work on the KDE desktop graphical interface could make Linux a more viable alternative on the desktop, Newton says. A slower economy could prompt smaller technology departments to consider Linux as a way to save money, he adds.

Chips are down

One area where consolidation remains unlikely: PC chip vendors. While Intel, AMD, and Transmeta can expect continued drooping sales, the companies are unlikely to join forces anytime soon. And you can expect processor technologies to keep improving regardless of market conditions.

Consumers will continue to reap the rewards of Intel and AMD’s ongoing price wars, with high-end processors finding their way into low-price PCs, says Dean McCarron, analyst with Mercury Research. And you’ll have little reason to buy a PC with an Intel Celeron or AMD Duron – the companies’ low-price chips – when you can get a P4 or Athlon system for well under US$1000, he says.

“In most people’s book US$799 is a low price point. Now is a very consumer-friendly bargain-rich environment,” McCarron says.

The biggest news in the mobile chip segment will be the introduction of the Pentium 4 chip into notebooks. However, because of the chip’s heat and power requirements, you’ll likely only see the processor in desktop replacement-size notebooks.

So, while digital cameras and networking products could see some interesting advances in 2002, the experts expect a slow year for other technologies – particularly the PC itself.

Giga’s Enderle predicts we won’t see any truly groundbreaking stuff until the next year. He says some products are in the pipeline for 2003 that will help rejuvenate the market if it’s still sagging.

Among them: Intel will release its new mobile chip code-named Banias, which it designed from the ground up for use in portable computers, Enderle says. Also Microsoft will roll out its next big operating system, code-named Longhorn, which will be more closely tied to the hardware.

Until then, however, expect most PC vendors – and related companies – to keep a low profile in 2002, the analysts say.

Right now, most vendors are engaged in a simple survival mentality, Enderle says. “Close the doors, hide in the cellar, and hope nobody comes in and drags you out.”

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