Can InFocus and Other Projector Vendors Compete With LCD TVs? (DELL, HPQ, INFS)

Includes: DELL, HPQ, INFS
by: Simon Lewis

A New York Times article talks up the future of front projectors in the consumer market -- for watching movies and TV. Meanwhile, an article in Consumer Electronics Daily, discussing the recent conference call at InFocus (INFS), implicitly raises questions as to the viability of this market. InFocus lowered its forecast for Q2 sales, based partly weaker-than-planned sales of its new entry-level consumer projector, the IN72 which suffered from a "tidal wave" of competition from flat panel TVs.

So where does the truth lie?

The $999 InFocus IN72 Projector (click to enlarge)

Front projectors are great:
- They offer the lowest cost per inch of any display technology for large screen display
- They don't require large pieces of furniture to sit on, or expensive wall mounting
- They can be set up anywhere (but watch the cables!)
- They give a great immersive experience

- If used on a daily basis, they have a high cost of ownership because of the cost of replacement lamps
- They don't perform optimally in normally lit rooms
- If they are not properly installed or positioned, they can't be left in place when they're not in use

As a result, for most consumers, front projectors are not and will not be a TV replacement. Inexpensive projectors will be an additional entertainment device in mid-income homes. High quality projectors will be installed in entertainment rooms for movie and event viewing.

Best Buy (NYSE:BBY) has placed the IN72 in the TV department of its stores. But front projectors are not TVs. Most analysts don't include front projectors in their TV market numbers. And consumers going into the store to buy a TV are unlikely to substitute one for a front projector. The success of front projection depends on the retail environment creating dedicated front projection departments, and on properly explaining the difference between an event-driven projector that sits in the closet and comes out on occasion, and a permanently installed projector in an entertainment room.

The front projector market is quite small and highly fragmented. Companies like Dell (NASDAQ:DELL) and HP (NYSE:HPQ) see a long term mass market opportunity for these products, and that's why they're in this market. Unlike InFocus, they don't need to justify their projector businesses on a quarterly basis. Some big consumer electronics companies have projector lines, but they are not mainstream products and generate modest revenues.

In Focus is the only publicly-traded company that is a pure front projection play. If and when projectors with sufficient performance can be sold profitably at prices attractive to consumers, this could be a huge market, much larger than the roughly 4 million units sold in 2005. Currently, though, consumers see a higher priority in installing a 40+" TV in their home, than having a projector that can, theoretically, give them a 100" image for "a night at the movies" once in a blue moon.