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Gary Shapiro is one of America’s preeminent trade showman. As president and CEO of the Consumer Electronics Association, he has presided since 1991 over a huge annual bash that draws makers of gadgets, computers, software and Web services. In an interview, Shapiro insists the economy is causing only glancing blows to this year’s Consumer Electronics Show, which opens on January 8 (preceded by events that include a keynote by Microsoft CEO Steve Ballmer the night before).

Shapiro, a familiar figure on CES stages himself, discusses the link between the recession and trade and promises for the first time to personally announce some technology that, for the moment, remains a secret.

Some edited excerpts:

WSJ: Can you recall a CES taking place amid such gloom?

Shapiro: That is a good question. Obviously the one after Y2K, that was very difficult. That was a very sudden jolt and people were just not flying, especially the Asians. And the stock market shut down for a few days.

In 1980 and ‘81, there was a recession. Interest rates were approaching 19%; unemployment was over 9%. There were gas lines.

Everyone always thinks this is the real one. I keep it in perspective. I think there is a business cycle and I think we will get through it.

Our industry is the one that this going to get the economy through this recession.

WSJ: Why do you think that’s the case?

Shapiro: Innovation creates investments. Innovation creates new jobs and new ways of doing things. There is a lot of innovation still yet to come. It (the downturn) is disruptive in the short term, because it causes some business to win and some to fail.

When I first started out, a travel agent booked my travel. Now I don’t think too many people use travel agents any more, and there were a lot fewer of them. A lot of things we just use the Internet for.

When I started out, the issue was whether the VCR was going to destroy Hollywood, and obviously it didn’t.

The real cool thing about this CES is it is in a time when Americans have voted for change. They voted for a digital president.

Our industry’s message has always been about change, and openness to new ideas. The incoming Obama administration’s vision is very consistent with our theme.

WSJ: Have you adjusted your sales forecasts.

Shapiro: When I speak at CES I will do our 2009 forecast. The forecast I gave last January was for 7% sales growth. We didn’t quite hit that, but we are in positive territory. We will give those numbers January 8.

We did release a forecast of 3.5% growth for the fourth quarter of 2008. We had to adjust that to no growth.

WSJ: How has the environment affected the show itself so far?

Shapiro: The show is not going to be our largest one. It will be our third-largest in history, with 1.7 million net square feet.

Last year was 1.8 million. We are down 6% or 7% in terms of the size of the exhibit area.

In terms of our attendees, in terms of pre-registration we are tracking where we were last year. Last year we ended up with about 142 thousand people. We were saying then before the show we would have over 130 and this year we are saying over 130.

The truth is, since pre-registration until mid-November is free, you just don’t know.

Looking at the pre-registrations carefully, I can tell you there is a drop in exhibitor personnel. We have 300 new exhibitors. But the numbers of personnel that exhibitors are sending is down significantly…

We have strong pre-registrations. But I can’t imagine we are going to hit last year’s 142.

WSJ: So not that many companies are pulling out of the show.

Shapiro: We have strong international registrations. Barring catastrophe, we will have more than 25,000 people coming from abroad.

It’s the largest consumer technology event in the world. And even with all the challenges, we have higher press preregistrations, we have more bloggers, we have more financial analysts.
A lot of people in the content community are coming. We are pretty optimistic and there are some interesting announcements in terms of new technology and products.

We have obviously a kind of a seminal show in that Bill Gates has passed the baton to Steve Ballmer. I’m speaking with Sir Howard Stringer of Sony. People are clamoring for those tickets in a big way.

The president of Ford is speaking. It’s amazing how many people want tickets for that. Of course, we have John Chambers of Cisco and Craig Barrett of Intel.

NBC has doubled the size of their exhibits and Brian Williams is going live with anchoring the Today Show. Sony is really pulling out all the stops. Sony pictures has gotten Jeopardy there, they are celebrating the 25th anniversary.

WSJ: How are hotel registrations doing?

Shapiro: That’s an interesting question. If you took a year ago, the biggest problem was that hotels were charging a five-night minimum at $500 to $600 a night. They tried that and what happened they couldn’t sell them. The leisure travel to Las Vegas went off the cliff. So now there are a lot of hotel rooms available.

We can’t really tell if the rooms are full. All we can see is the prices. There are good bargains there which is fabulous. That has nothing to do CES. The leisure travel has gone down.

The fact that the exhibitors that plan way ahead of time, they got scared off by those hotel prices. That is part of the story why they are sending fewer people.

WSJ: How do you think the downturn is affecting the content of the show?

Shapiro: I think every company is looking at what does it take to survive and be profitable.
But there’s a lot of really new cool stuff being introduced. There are a lot of demonstrations of mobile video. There are a lot of demonstrations of 3D television. That is kind of a cool exciting element.

There is a lot of style being added to televisions, and different ways it can be installed. There is a lot going on in the wireless area.

There is demographic targeting, going after the kids and going after the senior market. In the digital photo area, that is another area there is just so much going on.

Our view of the world is that frankly the recession is fundamental part of the business cycle. The CE industry is certainly down but we are down by an insignificant amount compared to any other industry.

WSJ: Have you been reaching out to the Obama team?

Shapiro: We certainly have been meeting with the transition team. I had a call this afternoon. They are focused a little bit on the DTV transom. It comes shortly after they are in there.
We are trying to engage them on trade. We certainly believe that we would like to see the Columbia Free Trade agreement passed. We’d like to see the free trade agreement with Korea. We’d like to see President Obama be given the authority to negotiate trade agreements as his predecessors have.

The connection between trade and tech is absolutely huge.

It’s my personal passionate belief that that innovation in technology is going to get us out of the recession, and that requires innovation and that requires trade.

The other strategy is getting the best and the brightest from around the world. So we’re trying to get the Obama people to free up the H1B visas. We want the most highly skilled people in the world coming to the U.S.

We are encouraged by the fact that Obama was the first digital president. He won because of the use of the Internet.

He loves his blackberry, how he used social networking to win. We are encouraged that he wants to appoint a tech czar or chief technology officer. We are excited about his pick for the Department of Commerce, his pick for U.S. Trade Representative. At this point is there is certainly a lot of optimism.

WSJ: Do you actually see any signs of protectionism emerging?

Shapiro: Congresswoman Pelosi would not allow a vote on the Columbia Free Trade agreement. It’s been endorsed by every major newspaper in the country. It has received bipartisan support from the governors’ association of America. It removes the tariffs on our exports, it’s like a no brainer.

It is expiring without being passed and it’s a travesty.

WSJ: Getting back to the show, do you guys get hurt financially by what is going on?
Shapiro: Like every other trade association in Washington we are belt tightening. We have not fired anyone. But we are looking at our costs. It’s just reality.

We haven’t seen any indication that people are forsaking our trade show for another.
The average attendee at a trade show has 12 different meetings at that show, that in theory replace other meetings around the country. I think trade shows have a great future.

WSJ: We got some jitters out here when Apple said they were skipping the Macworld trade show.

Shapiro: What we see there is, we had a lot of questions for years about Apple doing their own thing. For some international attendees they did both events.

What that gives us is an opportunity to encourage Apple and any exhibitor that sells Apple related products to benefit fromt CES in 2010. We will certainly be inviting them to participate in CES. We will have a separate area of the show just dedicated to them.

-Don Clark

Source: Ben Worthen

In an oddly Y2K-like phenomenon, owners of Microsoft’s 30-gigabyte Zune MP3 players awoke to a New Year’s Eve surprise when their gadgets spontaneously froze around midnight on Tuesday, causing a deluge of users to complain bitterly on Microsoft support Web sites (and to coin the clever monikers of “Z2K” and “Z2K9″ in reference to the breakdown).

No, Apple’s far-more-popular iPod did not place some kind of voodoo curse on the Zune, though other news outlets joked that aliens are perhaps responsible for the snafu as a means to hold Bill Gates accountable for the much-disliked Windows Vista.

Microsoft is evidently aware of the problem, is working to correct it, and apologizes to users for the inconvenience, who posted such wacky speculations on Zune’s bulletin board as, “Is this a virus? A glitch? A time bomb? A disgruntled Microsoft employee? Planned obsolescence to make us buy a new one? Or just a terrorist plot to drive the free world crazy?”

A Gizmodo reader wrote in to the blog and offered a solution involving a little bit of tinkering and deconstruction of one’s Zune so as to access the battery and hard drive and reboot both. But reviews were mixed as to whether or not this was a good idea, with one blogger commenting, “Maybe we should just let the Zune rest in peace.”

-Marisa Taylor

Source: Mhtaylor Mhtaylor

Sales for online retailers during the holiday season appear to have declined slightly from 2007, a calamity in an industry accustomed to growth of 20% or more. And it looks as though one group was keeping a tighter grip on its wallets than others: the wealthy.

Most retailers won’t disclose holiday sales figures until January. In the meantime, we’re left to piece together clues from third parties that track sales and Web traffic. MasterCard’s SpendingPulse unit reported last week that ecommerce sales were down 2% compared with last year, a figure that is in line with the 1% drop Internet-monitoring company comScore detected. ComScore also said that traffic to retail sites during the 2008 holiday season was flat compared with the same period last year.

The latest data comes from Hitwise, which measures traffic to 500 retail Web sites as a percentage of overall Web traffic. Using this metric, visits to ecommerce Web sites during the holiday season were down slightly compared with the same period last year. Hitwise also records demographic information about users, giving rise to the real shocker: Visits to these 500 ecommerce sites in December from people with household incomes over $150,000 dropped 12% from the same month in 2007. Visits from people in other demographics were more or less unchanged.

While people with household incomes between $100,000 and $149,999 visited luxury sites about 10% more often than in 2007, Hitwise said, traffic from the wealthiest people was down 15%. There’s a parallel in the offline world, where sales at stores offering luxury items dropped 35% compared with a year ago, according to SpendingPulse.

While there’s no direct correlation between Web traffic and sales–it could be that rich people don’t browse as much or just got their shopping done earlier–there’s enough circumstantial evidence to suggest that the rich are cutting back their online spending compared with past years.

-Ben Worthen

Source: Ben Worthen

Why has John Malone been dumping his shares of IAC/InterActiveCorp in the past two weeks?

The company controlled by cable industry pioneer Mr. Malone in recent weeks has sold roughly $17.5 million worth of IAC stock, including a 193,000 share sale reported Tuesday. Mr. Malone’s Liberty Media Corp. is the majority shareholder in IAC, the Internet conglomerate run by Barry Diller.

The recent slate of sales raises questions about whether Mr. Malone is losing confidence in his IAC investment, or simply has found a better use for the cash. Representatives for IAC and Liberty declined to comment Tuesday.

Mr. Malone, well known for his complex deals to avoid taxes, could use the paper losses from the IAC sales to offset taxes on other gains. Liberty’s investment in Sprint Nextel Corp. could bring a $1 billion windfall next year. Recently, Liberty Media has written down the value of its IAC stock by $440 million in the third quarter, citing the “lack of near-term prospects for recovery” in its IAC investment.

But the unusual and fraying business arrangement between Mr. Malone and Mr. Diller raises questions about whether the stock sales indicate renewed animosity between the two media moguls.

Through Mr. Malone holds the majority stake in IAC, Mr. Diller has held voting power over the stake. The arrangement was challenged by a messy lawsuit this year over Mr. Diller’s plan to breakup IAC. Mr. Diller essentially got his way, allowing him push through in August a separation of IAC, which owns online search engine Ask.com, dating site Match.com and other Internet businesses.

In an October interview, Mr. Diller said the spat with Mr. Malone was “water down the drain,” but he pointed out that he continues to have the upper hand over Mr. Malone and Liberty. “I outvote them,” Mr. Diller added.

To be sure, IAC hasn’t fared badly since the split in August – down about 6% while the S&P 500 index has fallen 31% over the same period — and its performance certainly has been stronger than other Liberty Media equity holdings such as Sprint (down 79%), Motorola Inc. (down 59%) and Time Warner Inc. (down 36%).

IAC shares closed Tuesday at $15.77, up 3.3%.

- Shira Ovide

(Barry Diller photo: Getty Images)

Source: Shira Ovide

In a move that looks increasingly like a sign of the times, The Parent Company, online retailer of baby-related products and advice, made the decision to shutter its doors Monday, with company CEO Michael Wagner citing the “challenging retail environment.”

Despite holiday markdowns of up to 60 percent on its Web site, The Parent Company has been exhibiting signs of a slow death march, announcing in mid-December that it was having difficulty paying off loans and was considering filling for bankruptcy.

The company apparently
owes $35.7 million to its lenders, and while it has assets of $20.6 million, it is trying to secure a $10.9 million loan in order to stay afloat while it seeks a buyer.

This will mark the second time that eToys, one of the Parent Company’s subsidiaries, has faced a Chapter 11 filing–back in 2001, after a run as one of the most successful online retailers for toys and other kid-related items, the company went under, only to rise again under a string of new owners, with New York hedge fund D.E. Shaw as the most recent.

The Parent Company is obviously not alone in its struggle–the American Bankruptcy Institute reports that 29,960 businesses went under during the third quarter of 2008, a 61 percent increase over the same period of 2007. And the number of bankruptcies filed so far for the first three quarters of 2008 trump the total number filed for the entire year of 2007.

The Parent Company did not immediately return phone calls.

- Marisa Taylor

Source: Mhtaylor Mhtaylor

There’s lots of talk in the tech industry these days about capitalizing on growth in “emerging markets,” countries like China, Vietnam and Brazil where people are rapidly buying computers and printers.

A story in Monday’s Boston Globe says Hewlett-Packard Co. is taking that strategy one step further: Its printers, writes Farah Stockman, “have become a top seller” in Iran — a country whose economy the U.S. government wants to prevent from emerging.

Since 1995, the U.S. government has had an on embargo on trade between U.S. companies and Iran due to the Iranian government’s “sponsorship of international terrorism and Iran’s active pursuit of weapons of mass destruction,” according to a U.S. Treasury Department fact sheet. The embargo is intended to stem the flow of both military goods and normal civilian commerce in order to isolate Iran — in recent years, the U.S. government has prosecuted people like forklift manufacturers, as well as those accused of trafficking in more nefarious devices, on charges of breaking the embargo.

Still, the Globe writes, H-P’s printers are apparently being sold in Iran by a company called Redington Gulf that’s based in Dubai, and therefore free from the embargo’s constraints. Redington’s Web sitesays that in 1997, with “a team of five people and the HP supplies as our first product, we started operations as the distributor for Iran.” According to the site, Redington sells items from other U.S. companies, including Intel, IBM and Microsoft.

The Globe story comes three months after an article in Portfolio magazine looked at how U.S. goods from companies including H-P and its competitors Apple and Dell get shipped through Dubai into Iran.

On Monday, an H-P spokeswoman said the company ““has a policy of complete compliance with all U.S. export laws.”

-- Justin Scheck

Source: Justin Scheck

Apple’s highly successful retail stores may be lauded for their sleek modern design and smart layout, but the Georgetown district in Washington, D.C. doesn’t seem to care.

Both the Georgetown Advisory Neighborhood Commission and the Old Georgetown Board, a design committee that must approve designs for all buildings in the historic district, rejected a re-submitted proposal from the Cupertino, Calif., company for the third time earlier this month, according to the Georgetown Current.

Apple announced more than a year ago that it was planning to build a store in Georgetown, and it has secured a site on Wisconsin Ave. – one of the main streets in the district – according to an Old Georgetown Board meeting agenda posted on its Web site. But the company has been unable to pass the review process so far.

The newspaper said that the heart of the matter was that the company’s designs called for too much glass. Apple most recently proposed a one-story building that would have a glass storefront with a solid-stone upper façade, but the two groups opposed the plans because it didn’t fit into the neighborhood. The Old Georgetown Board also didn’t like the large window on the upper part that would be shaped like Apple’s logo because it was too much like a “billboard”, it said.

A spokeswoman for Apple declined to comment on the details of the issue, but said, “We’re excited to bring Apple stores to Georgetown.” Representatives for the Georgetown advisory neighborhood commission and Old Georgetown Board could not be immediately reached.
For the near future, Apple may have to settle on doing business through its five stores in the suburbs in Maryland and Virginia as well as the Apple Campus Store which it opened at Georgetown University earlier this month.

-Yukari Iwatani Kane

Source: Yukari Kane

Wikipedia co-founder Jimmy Wales’ latest fundraising plea for the user-edited online encyclopedia raises questions about how long one of most popular Web destinations can sustain itself on donations alone.

Some critics have compared Mr. Wales’s personal appeal to an online telethon – while even supporters in the Wikipedia community have debated how best to turn off the endless donation appeals. (A gadget that removes the pleas was removed but then restored last month.)

Mr. Wales says that the pitches are necessary to keep the site’s nonprofit parent company, the Wikimedia Foundation, alive. “We’re a charity!” Mr. Wales says in an email. “We aren’t just a charity, either. We are one of the most astoundingly effective efforts, dollar for dollar, that has ever existed. We run the 4th most popular website on the Internet for a budget a tiny fraction of anyone else. We’re affecting more than a quarter of a billion people every month. I make no apologies for us paying the staff of 25 people who accomplish so much with so little.”

Mr. Wales says the $6 million fund drive will help finance Wikimedia’s operating expenses, including a staff of about two dozen people, software upgrades and Internet bandwidth costs. A banner on Wikipedia currently indicates the site has already raised $5.4 million.

Still, the endless fundraising highlights Wikipedia’s growing pains as it transitions from a sleepy nine-person operation in St. Petersburg, Florida to a 25-person professionally-staffed nonprofit in San Francisco.

This year’s Wikimedia’s budget of $6 million is nearly double the $3.5 million spent the year before , and that’s on top of a near doubling of expenses the year before that. Wikimedia has used that money in part to move to San Francisco and expand its professional staff, including the hiring of Executive Director Sue Gardner from Canada’s public broadcaster.

Wikimedia’s revenue, nearly entirely from donations, has more than kept pace with the expanding budgets, but in a recession, how long can Wikimedia sustain its ambitions?

- Shira Ovide

Source: Shira Ovide

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Not every retailer received the sales equivalent of a lump of coal for Christmas: Amazon.com announced Friday that the 2008 holiday season was its “best ever.”

 

Through Christmas Eve, total retail sales were down 5.5% in November and 8% in December, according to data released Thursday by SpendingPulse, a unit of MasterCard. Some of the decline was due to falling gas prices, but not all: sales of electronics and appliances were off 27%; sales of women’s apparel were off 23%; and sales of men’s apparel were off 14%. Online retailers were a relative bright spot with sales declining just 2%, according to SpendingPulse, a finding in line with comScore’s announcement earlier this week that online retail sales were down 1% from last year.

 

Amazon says it managed to buck the downward trend. Of course “best ever” could mean anything from most items shipped to most emotionally fulfilling holiday. But Craig Berman, an Amazon spokesman, clarifies that it means the company topped its previous record for sales. However, he declined to say the extent to which sales were up, or whether profits increased at all. Both will be revealed when the company announces its quarterly earnings in January, says Berman.

 

The bottom line number will be revealing because Amazon, along with other online retailers, tried to attract customers with steep discounts. “We were heads down focused on providing customers low prices this year,” says Berman. He added that the company also benefited from post-Thanksgiving promotions.

 

Online retail sales have grown around 20% each of the last few holiday seasons. Last year, Amazon’s revenue rose 42% during the December quarter, and net income jumped 112%.  

Source: Ben Worthen

For those parents out there whose children demand concrete information about Santa’s whereabouts and won’t settle for plain old “he’ll come down through the chimney,” NORAD’s Santa Tracker Web site is something of a Christmas blessing.

NORAD, or the North American Aerospace Defense Command, maintains a Web site using Google Earth in which parents and children alike can follow Santa in 3D and in seven languages while he makes his journey around the globe to deliver Christmas presents, and can even watch videos from his various stops. Kids can also send e-mails or call NORAD for updates on Santa in the days before Christmas (a note for media inquiries warns that “THERE ARE LIMITED TELEPHONE LINES AND THEY ARE EXTREMELY BUSY [ALL OTHER LINES ARE FOR THE CHILDREN!]”).

Who knew Santa was so tech-savvy (and if only the Easter Bunny and the Tooth Fairy could be as computer literate)?

Why does NORAD, a U.S. and Canadian military organization charged with monitoring the air space of North America, follow Santa Claus on his global travels? It all started back in 1955, when an advertisement for Sears Roebuck & Co. urged children to call Santa Claus, but misprinted the telephone number and accidentally listed the hotline for the commander in chief of the Continental Air Defense Command’ (CONAD), NORAD’s predecessor. Colonel Harry Shoup, who was the director of operations at the time, decided to play along and enlisted his staff to participate in the monitoring of Santa’s whereabouts via “radar.” NORAD continued to follow Santa each year and founded the tracking Web site in 1998. Apparently, two people from the public affairs office manage the program, and almost one thousand military personnel volunteer on Christmas Eve to answer phone calls and e-mails–according to this AP story, the site received about 10.6 million hits last year, and NORAD’s tracking center received 94,000 phone calls and responded to 10,000 e-mails.

Even better: The site also includes some FAQs about Santa (”NORAD intelligence indicates that he is AT LEAST 16 centuries old”), with answers to such burning questions as, “Do your planes ever intercept Santa?” (Answer: “Over the past 50 years, our fighter jets (F-16s, F-15s and CF-18s) have intercepted Santa many, many times. When the jets intercept Santa, they tip their wings to say, ‘Hello Santa! – NORAD is tracking you again this year!’ Santa always waves. He loves to see the pilots!”)

-Marisa Taylor

Source: Marisataylor[mhtaylor79 Marisataylor[mhtaylor79