Handhelds Expected To Grab Spotlight at E3

As video-game makers from around the world gather at the 10th annual Electronic Entertainment Expo -- known in the industry as E3 -- in Los Angeles this week, handheld hardware is expected to garner much of the buzz emanating from the show.

"There'll be a lot of looking at the handheld market this year, with both Sony (NYSE: SNE) and Nintendo having new products out and Nokia trying to refocus the N-Gage," David Cole, president of DFC Intelligence, a research firm speculating in the gaming market located in San Diego, California, told TechNewsWorld.

Showgoers hope to catch a glimpse of Sony's initial entrant into the handheld market, the PlayStation Personal, or PSP, which the Japanese firm's marketers already have dubbed "the Walkman of the 21st century."

Dual Screens

Nintendo, which owns the palm market with its Game Boy line, is expected to showcase a dual-screen handheld called the Nintendo DS.

More than 400 exhibitors from 70 countries are expected to display their wares at E3 over more than 51,000 square feet of floor space. Some 1,000 new products are expected to be introduced there this week.

None of those product will be a new game console. However, according to Cole, there is speculation in the press and elsewhere that Microsoft (Nasdaq: MSFT) will reveal when the next version of its Xbox console will be released.

Five-Year Cycle

The video-game industry runs on a roughly five-year cycle. That's about the time it takes to develop a new generation of consoles. Right now, the industry is at the end of one of those cycles, as the latest numbers from the NPD Group in Port Washington, New York, indicate.

According to NPD, first-quarter retail sales for the industry dropped 1 percent from 2003, to US$1.8 billion from $1.9 billion. Driving that loss were console sales, which dropped 24 percent to $336 million from $445 million a year ago, and portable game software, which slipped nearly 6 percent to $157 million from $167 million.

"The sales results for the first quarter exemplify the next-generation console's coming of age," NPD senior video games analyst Richard Ow said in a statement. "Most of the consumers in this industry have had their video game hardware for some time now, so a slight decrease in sales is to be expected."

More Sequels

"What will keep consumers coming back for more is the continued development of top-notch software titles, as well as accessories designed to enhance gameplay," Ow noted. "This, combined with advancements in the industry such as online game play, will help drive sales well into the future."

At the Expo, development of top-notch software will in large part mean building on past successes, according to DFC's Cole. "A lot of software people will be looking at will be sequels -- a lot of games with numbers after them," he predicted.

A preshow splash was made by HP (NYSE: HPQ) yesterday when it announced an a la carte PC for gamers called the Compaq X Gaming PC.

Gamers at Cutting Edge

Among the options available to gamers who buy the new HP PC are a choice of fast processors -- including AMD's (NYSE: AMD) Athlon 64 -- as well as 10,000-RPM hard drives, 48x combo CD/DVD drives and up to 2 GB of DDR 400 MHz memory.

The units also feature a Cooler Master Wave Master chassis, 9-in-1 memory card reader, Serial ATA on all hard drives and eight USB ports with locations friendly to gaming accessories.

DFC's Cole said he is surprised that more PC makers like HP have not gone after gamers more aggressively. "One of the biggest reasons for upgrading a PC is games," he contended. "It's typically the gamers that are pushing the cutting edge of the technology."

HP Makes Sense

To maintain a state-of-the-art machine, PC gamers may need to upgrade their machines every six to nine months, noted Derek Perez, a spokesperson for Nvidia (Nasdaq: NVDA), a maker of PC graphics hardware in Santa Clara, California. "PC gaming is for more of a hard-core gaming audience, people who want a more cinematic experience, who want something that looks more compelling," he told TechNewsWorld. "And if you want to go leading edge, you have to go to the PC."

"What HP has done makes sense, especially since it's getting harder and harder to convince people to upgrade," Cole added. "A gamer's PC is going to go out of date faster than anyone else's, so it has always baffled me why PC manufacturers haven't looked more closely at the PC game market."