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Product gives Thomson better hand: New micro-camcorder boosts prospects for unit French parent wants to deal

September 11, 2006

Thomson's latest product is a lot like the French company's presence in Carmel, these days.

Small, and getting ever smaller.

With half the number of employees it had in the late-1990s, Thomson's Americas unit here is about to be downsized yet again from its current 900-some jobs-but not before enjoying a bit of a surprise hit in a palm-size, under-$130 camcorder.

The success of the Small Wonder camera-and a slicker new version due out this fall-could help frame the future for the 170 employees who work for Thomson's audio-video and accessories business in Carmel.

To the extent the camcorder that the division helped develop and market is successful, it could make the A/V and accessories business more valuable to a buyer. Of course, whether that buyer leaves well enough alone in Carmel-or folds it into its own operations elsewhere-is still anyone's guess.

Last December, Thomson said it would sell A/V and accessories operations worldwide-the last vestige of what was once a consumer electronics empire known best for its RCA brand name.

Thomson is exiting the consumer electronics business for business-to-business media and entertainment products and services. Such holdings now include Hollywood-based film processor Technicolor and France-based broadcast equipment maker Grass Valley.

The A/V and accessories division was supposed to be sold by the middle of this year, under Thomson's initial plan. All that's known is that the French company has entertained a number of inquiries. In the meantime, product development goes on.

In May, the Carmel team launched in the United States the Small Wonder, which is aimed at technophobes and onthe-go users. The diminutive unit is operated by just a couple of push buttons.

At just a little larger than a cigarette carton, the camcorder fits in purses and glove boxes, for quick retrieval. The units also are always "ready" in that, rather than using rechargeable power units, they use two ordinary AA batteries. Nor does the unit use videotape; an internal hard drive can hold 30 minutes of recording.

Thomson's research found that sophisticated camcorders aren't popular among women, children and grandparents. Most said they generally don't record events more than 30 minutes at a time, anyway. And as this isn't Dad's $800 camcorder, it isn't a family crisis if the Small Wonder falls in the drink during a boat outing.

For the less technically challenged, the unit connects to a TV via a wire, and to a computer via a USB plug that swings out of the camcorder like some CIA gadget. The Small Wonder's built-in software allows users to watch video on a computer without having to load software.

Those without computers can take the camcorder to retailers and drugstores that can burn a disc viewable on home DVD players.

"In this particular case, we've succeeded in convincing consumers that less is more. We've consciously focused on simplicity," said Rich Phipps, director of business development for Thomson's A/V and accessories business in Carmel.

"We saw it as an ideal, underserved market," said Dave Arland, vice president of marketing at Thomson. "It's building on the tremendous, meteoric growth in digital cameras."

Phipps said the niche is "just the tip of the iceberg" in similar products, though he declined to elaborate. "The lesson learned from this ... is that there are other products that can benefit from this same approach of simplicity."

The irony is that, three years ago, Thomson abandoned the camcorder market entirely. By the time digital camcorders were the rage, Thomson found that to keep up with the technology it was having to buy the devices from other manufacturers and slap on its RCA label.

"We couldn't make money at it," Arland said.

That complexity more recently became opportunity, thanks in part to San Francisco-based Pure Digital Technologies Inc. A couple of years ago, Pure Digital developed a disposable camcorder-in the same vein as disposable still cameras-that it sold in drugstores.

Thomson licensed Pure Digital's software technology to develop the Small Wonder. Pure Digital has a nearly identical model of its own, but sells it through a lone distributor-Target stores.

Both units have received favorable reviews in the popular media this summer-not necessarily for video quality and features like optical zoom, but for simplicity of use.

Thomson has been selling the RCA-brand cameras to mass merchandisers, including Meijer, and this fall expects to launch sales through Kmart stores. Some Home Depot stores also stock the camcorder.

Thomson is developing another version of the Small Wonder for release this fall, one likely to cram additional features into the small device. That's assuming there still is an A/V and accessories business in place by then, of course.

Industry sources see scenarios ranging from a Chinese firm buying Thomson's A/V and accessories unit to get the RCA brand name to a buyer that sees value in its product development and marketing acumen here and builds on it in Carmel.

Greg Tarr, executive editor of This Week in Consumer Electronics, had suspected the business would be sold to an emerging Chinese firm that snaps it up to instantly gain a brand name and access to U.S. markets.

After all, that's what Chinese television maker TCL did in 2004 when it bought Thomson's TV business. Now about 200 people in Carmel work for TTE Corp., which sells TVs under the RCA brand name.

But now, "From what they've been telling me, they're trying to avoid that," Tarr said. "Supposedly, [Thomson is] looking for something more substantial," he said of the audio-video and accessories unit scenario.

"It will be up to the buyer to determine what comes next," Arland said.

He said the division has some advantages being in Carmel-a relatively lowcost base of operations close to Chicago retailers.

Thomson has about 900 total employees in Carmel, including the 170 who work for A/V and accessories. Most work for Thomson's research, set-top box development, corporate support and consumer network solutions telephony business units.

Thomson's new business model includes developing set-top boxes for satellite and cable TV firms. So that appears to leave the larger, 700 jobs in Carmel safe-at least for now.

New technology allowing phone providers to push high-quality video through their phone networks also could provide new opportunities for Thomson.

Thomson in the late 1990s employed about 1,500 at its Carmel operations. It once had the No. 2 market share for televisions. But its share tumbled after China was admitted to the World Trade Organization, bringing a flood of inexpensive Chinese brands such as Apex and Haier.

Thomson once employed more than 3,000 people in Indiana. It closed its Bloomington TV assembly plant, once the world's largest, in 1997, eliminating 1,500 jobs. Hundreds of others lost their jobs in recent years with the closure of its Marion picture tube plant.
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