HP CEO Mark Hurd says it will be a while before HP can offer a firm metric on netbooks

Netbooks have become a major category for most computer makers. The sole holdout among the major PC makers not offering a netbook continues to be Apple. Consumers have flocked to netbooks for many reasons; one of the most significant being price.

Many analysts and reports claim that netbooks are cannibalizing sales of more expensive notebooks that are on the market. EWeek reports that HP CEO Mark Hurd talked about the cannibalization of higher-end notebook sales by offering low cost netbook computers.

Hurd said, "I've seen in print, from people who claim expertise, that 80 percent of netbooks is new [sales] and 20 percent is cannibalization of the bottom part of the notebook market." Hurd also says that HP has "some time" before they can offer a usable metric regarding cannibalization of sales caused by netbooks.

The reason for this is that HP is relatively new in the netbook market. Hurd does say, "It's not the move to netbooks that's cannibalizing. What you have is someone buying a more thickly configured notebook, who's now buying a more thinly configured notebook, and that's what's adjusting the ASP [average selling price]."

This accounts for one of the reasons shipments are up for many computer makers, yet revenues are down. Many wonder with the current poor global economy is it wasn't for netbooks, would consumers be buying new computers at all.

IDC forecasts that netbook sales in 2008 are going to be about 10 million units. The overall notebook market is expected to ship 142 million units meaning that netbook shipments are only 10% of overall notebook shipments.

Analysts also say that smaller computer makers like Acer are using the netbook to grab market share from the big players in the industry like Dell and HP. Acer currently has the most popular netbook on the market with its Acer Aspire One. IDC analyst Richard Shim said, "A year ago they [the smaller PC vendors] were hardly in the market, and so the gross rate is pretty exceptional."

Shim told eWeek, "In just over a year, they've (netbooks) evolved from these Linux-based, solid-state devices into fully [Microsoft] Windows OS-based, 120GB hard drive systems, which are very similar to traditional notebooks. So we've had a dual effect here, with many netbooks becoming more robust and expensive, while notebooks have come into the same price range."

The line between the netbook and the notebook is certainly blurring. Sony introduced its VAIO P that is a netbook in all but name yet carries a price tag of a notebook system. At the same time, Dell has a 12-inch Mini 12 netbook that is sized like a normal notebook computer but priced like a netbook. What we may see in the coming months is that while some notebook users defect to cheaper netbooks, some netbook users will at the same time be defecting to more expensive and more robust notebook computers.

The question of cannibalization of existing products isn’t only being asked to computer makers. Many are asking the same thing of Intel with the massive success of its cheap netbook processor, the Atom. When Intel unveiled the new Atom N280, it offered little in performance gain compared to its predecessor the N270. Many felt that the miniscule performance improvement in raw power was directly related to Intel's desire to not cannibalize its faster processor sales where profit margins are higher.

"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007

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