RPT-CES-Growing pains, hiccups greet tech's old guard

* Largest tech show may mark changing of tech guard

* Some say the desktop PC is dying

* ARM unlikely -- and briefly -- star of show

By Bill Rigby and Edwin Chan

LAS VEGAS, Jan 7 Nvidia (NVDA.O) Chief Executive Jen-Hsun Huang learned firsthand how pervasive -- and demanding -- mobile devices can be.

When he tried to demonstrate a tablet computer at the Consumer Electronics Show on Wednesday, so many people in the audience had their devices connected to the Web that the network collapsed and his presentation short-circuited after a few minutes.

"You guys suck," he said.

Huang's widely discussed crack betrayed a private sentiment shared by some of technology's old guard, who face the painful task of reinvention as the mobile Internet eclipses the personal computer's role in everything from work to leisure.

The Consumer Electronics Association estimates that 70 percent of all gadgets -- TVs, tablets, phones, even gaming handhelds and printers -- will boast an Internet connection by 2014, from virtually none just a few years ago.

That trend signal a shift in the tech balance of power from the so-called Wintel hegemony and the PC makers like Dell Inc DELL.O that thrive off it, to smaller but booming companies like chip designer ARM Holdings (ARM.L) and Netflix (NFLX.O).

Consider: Microsoft made the biggest splash, not by unveiling some stunning new PC or software -- its bread and butter -- but by stepping away from its decades-old alliance with Intel Corp (INTC.O) as part of a concerted move into mobile devices, backed by its support for ARM processors. [ID:nN05285026]

Sony Corp (6758.T) talked up its VAIO PC line, but the headlines leaped at an executive's bold claim that it will be No. 2 in tablets by 2012 -- bold because the erstwhile king of consumer electronics has lagged fleeter-footed rivals like Samsung Electronics (005930.KS) for years. [ID:nN06131330]

"Windows PCs will continue to adapt and evolve," said Microsoft CEO Steve Ballmer at the show's opening keynote speech, but his company's predicament was illustrated by the range of half-built machines, guts all on show, which Microsoft hastily assembled to demonstrate the new ARM capability.

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Take a Look: Consumer Electronics Show [ID:nN06281426]

Graphic on PC, tablet sales: r.reuters.com/tub84r

Graphic on smart phone OS r.reuters.com/xap64r

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Ballmer's boot-strapped demo was a far cry from Apple Inc's (AAPL.O) slick product rollouts. The iPad inventor and de facto creator of the tablet market kickstarted a trend in people getting access to "the cloud" anytime, anywhere, with its iPhone, and now the tablet, which could ship 36.5 million units in 2011, according to research firm iSuppli.

Although not on the show floor, Apple's presence loomed large. More than 30 tablets were announced over 48 hours, with virtually all -- from Sony to Asustek Inc, mentioning Apple as the one to catch. [ID:nN02147197]

All those connected devices require two things to prosper: a blazing fast Web connection and content. The former's absence on and off the tradeshow floor made itself known as emails went unsent, Web pages remained unvisited and stage presentations went awry.

At CES, all the major U.S. carriers boasted that they are upgrading their networks, spending billions of dollars in the process, to fourth-generation and faster technology. Verizon Wireless said it will carry 10 new 4G devices in the first half.

Verizon Wireless, AT&T Inc (T.N) and T-Mobile USA jostled to show that they were in the best position to get people to use their highest-speed wireless data services, setting the scene for bitter rivalry this year.

Rather than coming out with new applications, operators said that the ability to get quality video to cellphones would go a long way toward impressing consumers and giving them enough reason to buy high-speed services.

"It (video) has always failed in the mobile space," said Cole Brodman, T-Mobile USA's chief marketing officer. "Now 4G can make it a nice experience."

At Verizon, the video push will come in many directions including multi-player gaming and video chat, making use of front- and back-facing cameras in phones and tablets.

Against the overwhelming tide of interest, Intel Corp (INTC.O) at CES stuck to its script, unveiling a new core processor for the personal computer. CEO Otellini waved off the Microsoft-ARM alliance as "not a big deal."

Off the show floor, he indicated some bemusement with the media frenzy over Microsoft's move, and not his company's new Sandy Bridge processors.

Shares of Intel traded as much as 2 percent lower on Friday.

At the same time, he reiterated that the first smartphone with an Intel brain will make its debut this year.

"You need that strategy, to be on whatever screen people are going to be on, on whatever devices they're on," said Kim Caughey Forrest at Fort Pitt Capital.

ARM, basking in the glow of its Microsoft design win and an announcement that Nvidia will begin making CPUs based on its architecture -- potentially catapulting ARM into servers and PCs as well -- couldn't resist a dig at the chip leviathan.

"Intel has been saying for years they're going to get into mobile. They've had a totally inappropriate product until recently," ARM President Tudor Brown told Reuters. "Their product has been improving in terms of power consumption, it's still not as efficient as ARM, but it's getting closer."

"At some point it becomes viable to start building those things into tablets. But it still doesn't really make sense in mobile phones."

(Additional reporting by Gabriel Madway, Sinead Carew, Noel Randewich, Isabel Reynolds and Miyoung Kim) (Editing by Kenneth Li and Robert MacMillan)