Opinion on  Handheld Entertainment Inc. (ZVUE)     Sector: Consumer Cyclical  >  Industry: Audio & Video Equipment
Investors unimpressed as ZVUE hits Wal-Mart

HandHeld Entertainment's (ZVUE) (articles) ZP-3 and PVP-200 players are now at Wal-Mart stores according to various accounts, and are even available on Walmart.com.



That's a good step, but I still don't think the offering is competitive. Wal-Mart sells the clunky PVP-200 for $94.86 online with 128MB memory, yet for less than four dollars more it offers the sleek Creative Zen V 1GB portable video player with 8x the memory and an OLED display.



This holiday season will likely be remembered as a critical lost opportunity for ZVUE. It offered too little, too late, and has now positioned itself squarely as a third-tier hardware manufacturer coupled with third-tier nonproprietary content. If I ran HandHeld, I would try to raise more cash before the YouTube comparisons fade from investor's memories, and the reality of Christmas sales results set in.

Earlier this year I doubted Handheld Entertainment’s: ZVUE claim that it would price its next generation ZVUE 260 portable MP3/video player at $149. After all, competing flash-based players were already dropping towards the $100 price point, and below that for the value end of the spectrum.

As expected, Handheld was forced to drop the retail price below $100 in its initial release today, and had to include a 1GB flash card versus the 512MB card spec’d in February. Can ZVUE generate profits at these price levels? I highly doubt it, but we will see over the coming quarters.

Bottom line: I still think that ZVUE should give up its continuously unprofitable hardware business before it drags the company under, and try to salvage some value from its online properties.

DISCLOSURE: no position.

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