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Switched On: When hardware startups zagged


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Each week Ross Rubin contributes Switched On, a column about consumer technology.

In 2008, a year in which some of the most-used American political buzzwords were "change" and "maverick", many technology companies bucked conventional wisdom. With rising penetration across a broad range of mainstream consumer technology categories, it has become more difficult than ever to compete in the device space if you're not bringing something different to the party.

The year did not start out auspiciously for those going against the grain, as CES 2008 brought news of Warner Brothers' decision to exclusively support Blu-ray as opposed to underdog HD DVD. The move set off a swift collapse of the HD-DVD partnership and Toshiba officially threw in the towel a few months later.

Meanwhile, in San Francisco, Steve Jobs used part of what is slated to go down as his final Macworld Expo keynote to announce something that wasn't very surprising -- shifting the focus of Apple TV from a PC-centric content shifter to a broadband video store. But two open-source efforts have stepped in to shake up the home video space – Boxee, which can run on Apple TV hardware, and NeurosLink, the open-source hardware developer's foray into a set-top box optimized for streaming video from the Internet. Neuros currently has a list of bounties posted, offering dollars for developers who can bridge gaps in its software's functionality.

Indeed, as the availability of broadband video exploded, physical media rental rivals Netflix and Blockbuster took their battle to the digital realm. Unlike most integrated approaches such as Apple TV and Vudu, which are tied to their own services, both have stated their plans to embed digital rental capabilities into a range of home video products, but both began with dedicated hardware partnerships. Roku's Netflix streamer has been well-received by Netflix subscribers, while 2Wire's MediaPoint which supports Blockbuster's progressive downloads has had its share of early kinks. Eschewing rentals for music, Lala rolled out the "Web song", a digital single you buy for a dime that lives in the cloud, but the company is hedging its bets, letting you buy an MP3 of the Web song and even crediting its price should you decide you want it closer at hand.

In smartphones, two of the pacesetters broke with industry convention. Apple opened up the iPhone to developers, but set strict rules, including barring programs that engaged in background processing. RIM broke with its long aversion to touchscreens with the BlackBerry Storm, which used a novel clickable screen but mostly retrofit touch onto its menu-driven user interface. While many of the iPhone's limitations have proven frustrating, developers have nonetheless flocked to exploit what they can. Meanwhile, while reaction to the Storm remains mixed, Verizon claimed strong sales and many BlackBerry developers are updating their applications to take advantage of the first touchscreen BlackBerry.

Speaking of smartphones, two startups reacted to their growing popularity in diametrical ways. Peek developed a device that is a smartphone alternative for nontechnical consumers attracted to retail channels despite its monthly fee. In contrast, Celio Corp,'s REDFLY broke with netbook mania by offering a corporate-focused smartphone companions that offers a larger screen and keyboard complement the applications and connectivity of a smartphone using Windows Mobile, with others in tow. With both companies catering in their own way to the economic downturn, they are reporting early success. Peek is expanding into more retailers and Celio has followed up the original REDFLY with two less expensive successors.

The attention paid to touchscreens this year evolved the many attempts to bring the advantage of the pen to the computer, but this year Livescribe sought to bring the computer to the pen. Its Pulse smartpen takes the elements that made Leap Frog's Fly smart pen a hit for kids and packages it into something for adults. The Pulse's development tools are still evolving so many applications aren't yet something to write home about, but its synchronization of audio to note-taking has become a less expensive and in some ways more versatile alternative to netbooks, with strong appeal to students needing to capture diagrams digitally.

But not every hardware startup saw its products flourish in 2008. Dash Networks, which pioneered a portable navigation device with two-way cellular connectivity, couldn't get cheap enough fast enough to spur sufficient consumer demand and decided to focus on services for other manufacturers. Days after news of its withdrawal, though, cell phone GPS provider Telenav entered the market with its own cellular connected GPS dubbed the Shotgun.

Finally, Bug Labs, a company whose product is so unusual that it is named after a programmatic aberration, shipped its first BUGbase and BUGmodules, which enable Java programmers to snap together their own gadgets. If the company has its way, it could create communities of micromarkets for specialized or custom gadgets, albeit those that, for now, seem more focused on specialized tasks. I'm not holding out hope for one that can predict success in the consumer technology market.

Ross Rubin is director of industry analysis for consumer technology at market research and analysis firm The NPD Group. Views expressed in Switched On are his own

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