The Netbook threat

One of the many different elements of managing the itp.net website that fall under my remit is choosing five stories for the 'Editor's Choice', my pick of the most important stories of the last few days (what with being the editor and all that)

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The Netbook threat (Getty Images)
By  Mark Sutton Published  January 18, 2009

One of the many different elements of managing the itp.net website that fall under my remit is choosing five stories for the 'Editor's Choice', my pick of the most important stories of the last few days (what with being the editor and all that).

It's not normally a job that requires a lot of thought, but on this grey Sunday morning, I was struck by one thing - just how few positive stories there were to choose from. In fact, there really weren't any good stories at all. More layoffs at AMD, Motorola and so on, PC markets down, Nortel filing for bankruptcy, Satyam's situation looking ever more precarious, Steve Jobs condition getting worse, on and on it goes.

The only positive noises are coming from the Gulf telcos, whose licence buying spree rumbles ever onwards, and a slight swell of new projects in Iraq. Everywhere else, its doom and gloom.

One standout story was Intel's poor results, hit by declining PC markets. The results announcement did contain what seemed like a positive, in terms of strong growth in sales of the Atom processor, but unfortunately, because margins are so low on the Atom, their strong growth wasn't matched by a corresponding growth in profits. And with Dell announcing a $99 netbook in the US, it raises the question - are netbooks going to cannibalize the notebook market?

Its definitely something that seems to be worrying some PC vendors, although the sector has emerged so fast, its still hard to tell exactly what the true situation is. Different vendors are taking different approaches to netbook form factor, usage model and specifications, but virtually all of the devices are cheaper than notebooks, and produced on very narrow margins.

Dell has even announced a $99 netbook in the US,and although the device will only be offered as a subsidized bundle with an ISP service, if a tier one vendor like Dell can produce a quality device for such a low cost, then the rest of the market is going to be under pressure to go low too.

I've been trying out a netbook myself for the past few weeks, (one of Acer's models, on loan from Intel) and I've been pretty impressed. The Linux-based OS takes a little bit of getting used to (I had more trouble converting Open Office docs to MS Office than anything else) but the look and feel is so close to Windows as to make it accessible to even novice users. I got a few comments that the netbook might be a little bit on the small side for me, and typing can be a bit clumsy, but I've still been pretty impressed. I'd certainly recommend one to anyone that doesn't really need or use the full range of applications that fully specced desktop or notebook offers.

In cost-conscious times, the netbook looks like a very good deal for a children's or teenager's computer, or even as a general home PC. The vendors say its too soon to know exactly what impact netbook is having on traditional notebook sales, but I think its fairly obvious that its going to take a chunk out of them.

There's a further twist to the situation in that Microsoft is aiming to make Windows 7 netbook-compatible (although Redmond might need to think about the cost of the OS if its going to make it truly compatible with the netbook model of small, cheap computing) But if a user can get the full Windows OS on a much cheaper device, then vendors will face a much tougher job of distinguishing between systems, and in selling users on  more expensive notebooks. The most exciting new product category of 2008 could well become a burden on vendors in 2009.

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