Gadget Watch: Blu-Ray Zaps HD-DVD, and 5 Other Consumer Electronics Stories

1. Blu-Ray zaps HD DVD. In another win for Sony (SNE), Warner Bros., a subsidiary of Time Warner (TWX), said it will release all of its HD DVDs in Blu-ray format from June. Warner Bros. has been releasing DVDs in Blu-ray and HD formats, but said that has created confusion among consumers. The WSJ calls this a coup for Blu-ray camp leader Sony (SNE). Apple (AAPL) is expected to affirm its support of Blu-ray at Macworld. Kaufman Bros. says the Warner Brothers decision is a positive for DTS (DTSI) and Dolby (DLB), which receive royalties on every Blu-Ray player sold.

2. Slower hardware spending? UBS downgraded IBM (IBM) and Network Appliance (NTAP) to "neutral" early Monday, due to its outlook for slower hardware spending. UBS prefers Apple (AAPL) and HP (HPQ). Apple has new growth opportunities, and IBM is a "unique" defensive play.

3. CES disappoints. The Consumer Electronics Show has traditionally been a catalyst for CE stocks, but this year Bill Gates' keynote address "sucked", some companies are scaling back their participation even as the event expands, and the focus of this year's CES is "evolution, not revolution", code for "nothing interesting". If you want to follow the torrent of PR, here's Engadget's play-by-play with pictures, a summary by MarketWatch, and the WSJ's CES Notebook). Microsoft (MSFT) announced deals to bring hit ABC and Disney (DIS) programs to Xbox LIVE, as well as MGM's video library.

4. The end of DRM music? Napster (NAPS) announced Monday it will abandon its sales of DRM music downloads in favor of DRM-free MP3s, which are expected to be available between April to June, pending negotiations with the major labels. Meanwhile, Sony BMG said it will offer DRM-free music downloads, but only to consumers who buy a plastic card pass from a retail store first. "Ridiculous"" says Techcrunch.

5. TV to mobile. LG Electronics has developed a low-cost means of transmitting digital TV signals to mobile devices in North America. LG is not listed in the U.S., but is a 2% component of the iShares MSCI South Korea Index ETF (EWY).

6. PS3 rising? Sony (SNE) said it sold 1.2 million PS3s in North America over the holidays, as well as 1.3M PS2s and 1.4M PSPs. On Saturday, the Nikkei reported Sony plans to add Skype connectivity to the PSP. Skype is owned by eBay (EBAY). Sony stock rose 0.4% in Japan on Monday after dropping 6.6% on Friday. Nintendo's ordinary shares (NTDOY.PK) fell 6% on Monday. Separately, the Consumer Electronics Association said Saturday it expects game industry sales to slow in 2008.

Comments

[Long-ShortGuy]

Napster going DRM free puts more pressure on AAPL. Amazon already offers DRM-free music. Hopefully Apple will go DRM free soon.

[Lisa]

DTSI and Dolby get paid for their surround sound technology, which is included in Blu-Ray players, but I think also HD-DVD. The problem until now has been that neither format has taken off because consumers are waiting for one to win. The Warner Bros decision now tips this to Blu-Ray, and means the market will take off, and that will help every stock that benefits from Blu-Ray sales, including those two.

[Tom B]

"1. Blu-Ray zaps HD DVD". No surprises. They've had the better technology since day one, but, more importantly, they've had more titles and players out there for a while.

"Hopefully Apple will go DRM free soon." Apple's offered DRM free for close to a year. Does Napster have any adavantage? DRM-free at the same price, or something? If not, I see no angle. Also, iTunes DRM is pretty painless for people; DRM-free might not be a huge draw.