Can VIZIO Beat Industry Goliaths?

If David had a 1-0 record versus Goliath, are the odds still against David in the next fight? Private TV maker VIZIO, once a David in the TV industry, hopes to repeat its win versus the goliaths of personal computers and tablets. Should these industry giants be scared?

The last fights
VIZIO started as a consulting company in 2002 to help Gateway, the once cow-branded computer retailer, create TVs for its stores. Once Gateway abandoned its stores, VIZIO founder and CEO William Wang decided to make TVs himself, focusing on affordable pricing. VIZIO began churning out TVs in 2003 and retailing them through Costco (Nasdaq: COST  ) and in a short while became the top shipper of LCD TVs in 2009. As of the fourth quarter of 2010, VIZIO continues to beat traditional TV suppliers and maintains the highest market among both LCD and flat panel TVs:

Vendor

LCD TV Market Share

Flat Panel TV Market Share

VIZIO 27.6% 23.9%
Samsung 20.2% 21.5%
Sony (NYSE: SNE  ) 10.1% 8.8%
LG (NYSE: LPL  ) 9.4% 10.4%
Toshiba 6.8% 5.9%

Source: HIS iSuppli February 2011.

VIZIO does have yet to prove itself in markets outside TVs. VIZIO's first tablet, released mid-2011, seems to have suffered from poor timing, competing against Amazon's $200 Kindle Fire. VIZIO's tablet was originally priced around $300 but sold for less than $200 at Costco and Wal-Mart just months after release in November, according to online deal forums. VIZIO also showcased a smartphone early last year but has yet to follow with any news of a release date.

The next bout
VIZIO now looks to gain another foothold in personal computing. At this year's Consumer Electronics Show, VIZIO is revealing a pair of all-in-one PCs, three notebooks, and a larger tablet. VIZIO mirrors the design from Apple (Nasdaq: AAPL  ) -- with a clean, brushed metal look, all-in-one desktops with wireless keyboards, and razor-thin laptops -- so much so that I wouldn't be surprised to see a lawsuit from Apple in the future.

VIZIO hopes that the fresh designs will "live with our lifestyle in our living rooms," and that the computers and tablet will be a complement to VIZIO TVs in delivering entertainment to consumers in what it calls the "VIZIO Entertainment EcoSystem." This sounds very similar to a Steve Jobs' quote in Walter Isaacson's biography: "'I'd like to create an integrated television set that is completely easy to use,' he told me. 'It would be seamlessly synced with all of your devices and with iCloud.'"

With rumors that Apple's readying a slingshot to fight against VIZIO's TV sets, and VIZIO throwing a stone at Apple's PC and tablet business, the battle between these two companies will be a tag-team of Davids and Goliaths on both sides. VIZIO's traditionally low price position can hurt Apple where it's most vulnerable, but VIZIO must contend with Apple's superior brand, ease of integration between products, strong body of developers, marketing savvy, and on and on. This might be an uphill fight for Vizio.

Of course, many other competitors must worry about VIZIO's moves if it is able to disrupt and succeed in the PC business as well as it has in the TV business -- for example, Hewlett-Packard (NYSE: HPQ  ) , which leads in PC market share and makes more than 30% of its revenue from its personal systems group. If new HP CEO Meg Whitman can't revitalize the company after its previous missteps, in which it actually considered selling off its PC division, VIZIO could reign atop the PC market share if given the five years it took to dominate TVs. As Vizio CEO Wang said, according to The Wall Street Journal, "Our goal is to be the next Sony in 20 or 30 years." That was four years ago.

Unfortunately, VIZIO is privately held, so investors must look elsewhere to make bets on its business. One move is banking on Costco, VIZIO's first retail partner and the place where VIZIO still gets a majority of its business. Costco even helped VIZIO develop packaging to help appeal to customers. According to its latest annual report, Costco made 18% of revenue from "hardline" items, which includes electronics. Another move is avoiding VIZIOs soon-to-be competitors in the PC industry.

Or if you are thinking of investing in the smartphone and tablet markets where VIZIO has yet to prove itself, read about these three companies that are quietly cashing in on the booming mobile industry in this free report.

Fool contributor Dan Newman's first TV was a VIZIO. He holds no shares in the companies mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On January 22, 2012, at 12:37 AM, UnicornSF wrote:

    Vizio is a great success story on HDTV due to the fact that they entered the market when the flat TV market was relatively young. And they were very lucky... But PC market is very different. It's very mature and already entreched with powerhouse competion in a very tough market. Also, Vizio appeared to have failed on the tablet PC segment already, and to compare Vizio to Apple is like comparing a high school baseball team to the SF Giants: Just because they want to play the game, doesn't make them a major league player. Pretty soon, Vizio will figure out they need to stick to the one thing they've been good at - because it appears they are also losing their market leadership on HDTV.

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