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Margins are dropping like flies in the laptop market

Consumers are staying away from the higher-priced notebook computers that sold relatively well in years past thanks to the poor global economy. Instead of buying the high-end and expensive notebooks that may have been the choice in 2007 or 2008, consumers are buying low-cost netbooks in droves.

EWeek reports that the massive increase in sales for low margin netbooks is destroying the notebook market and that Microsoft must work with OEMs to stop the crisis. Netbooks are leading the PC market in sales and according to eWeek destroying margins at a "shockingly alarming rate."

Analysts from both IDC and Gartner say that the netbook category is posting strong numbers as sales for notebooks in higher margin luxury segments are dropping. The victim as netbook sales soar according to eWeek is average selling prices (ASP). Gartner analyst Mikako Kitagawa said, "U.S. mobile PC ASP likely will decline as much as 20 percent year over year in first-quarter 2009. Overall, end-user spending on PCs is likely to have contracted in the upper teens in first-quarter 2009 compared to a year ago."

ASPs for notebooks have traditionally been higher than the ASPs in the desktop market. In August, eWeek reports that ASP for Windows desktops was $569 while the ASP for Windows notebooks was $689. By December 2008, ASPs for Windows desktops had dropped to $533 and ASPs for notebooks dropped to $602.

By February of 2009, Windows Desktop ASPs were only $20 more than laptops at $540 for notebooks and $560 for desktops. The decline in ASPs for netbooks reportedly tracks closely with the increase in sales for netbooks, which makes sense considering the netbook is cheaper than the average notebook.

Windows XP is another way to track the impact of netbooks on the computer marketplace. Windows XP was all but gone from the retail marketplace in August 2008. By December of 2008, XP Home machines were second in market share next to Vista Home Premium. Windows XP Home was most commonly sold on netbook computers. EWeek reports that Microsoft loses a massive margin on Vista each time a PC is sold with XP.

The answer to the problem of netbooks cannibalizing notebook sales according to eWeek is twofold. Computer makers need to reduce advertising and separate netbooks from the larger notebook market. Exactly how that would make for higher margins in reality is hard to fathom. Even if you consider netbooks to be their own category, it seems that ASPs for notebooks would only go up on paper.

One route to better margins is by subsidizing the cost of netbooks for consumers by bundling them with mobile broadband contracts. This would allow the consumer to get a netbook for less money up front and would allow netbook makers to reap more profits by locking users into a mobile broadband contract for a two-year period.

EWeek admits that under this plan, ASPs may go down even further, but margins would go up. Requiring a mobile data contract to be wrapped into the purchase of a netbook with a plan like this would undoubtedly affect sales of the low cost netbooks, as most consumers won’t want a mobile broadband contract at $60 to be able to buy a netbook.

HP CEO Mark Hurd talked about netbook cannibalization in February and said that it would be a while before HP had a usable metric regarding netbook cannibalization.

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By xxsk8er101xx on 4/20/2009 11:29:48 AM , Rating: 5
The people buying netbooks are those that wouldn't have bought a laptop anyway.

It's the classic "we're losing money on music because of downloads" - they can't even prove that. Chances are they wouldn't have bought it to begin with because they don't have the money.

I hate these types of arguements because you can't prove it but the bean counters assume everyone that has a netbook would have bought a laptop. this is wrong.

RE: No
By DASQ on 4/20/2009 11:41:45 AM , Rating: 5
Or, tons of people who are buying netbooks are realizing they don't need a full size 15" to do what they do on a computer (internet, email, music).

RE: No
By tviceman on 4/20/2009 11:54:36 AM , Rating: 2
Or they buy it thinking all they'll want it for is music, internet, and email but find out that when they want to do something else they can't and they'll think it's a piece of junk and feel burned buying it.

RE: No
By DASQ on 4/20/2009 12:05:10 PM , Rating: 4
That goes for just about anything, though. Like those fellows buying $800 laptops for Autocad and finding it's sooooo slow boo hoo.

RE: No
By Smartless on 4/20/2009 2:45:18 PM , Rating: 2
Hehe yeah but I think it can keep up with the user who wants to autocad on a single 17" screen versus having a workstation with dual or quad monitors.

RE: No
By cheetah2k on 4/21/2009 12:06:16 AM , Rating: 2
The new Sony Vaio P netbook has wow factor - aside from the squinting eyes to see the text!

I also have a Netbook MID (viliv S5) and love it (except that it doesnt have native 3G support)

We can all thank the OLPC XO for starting this (r)evolution!

RE: No
By TomZ on 4/20/2009 12:10:07 PM , Rating: 3
80% of people won't ever do anything else. I know lots of extended family members that are not technical users. They are using their computer for all the things you listed, and nothing more.

And I would also add that most general business users I know just add Microsoft Office to the above, that's it. I would think that Office would run just fine on a netbook, although I haven't tried it myself.

The real issue with the industry is that the harware capability far exceeds most peoples' real needs. Sure, there are a lot of us who want/need the higher-end machines, but for the majority of users, even an Atom-based machine will meet their needs.

RE: No
By Suntan on 4/20/2009 4:24:35 PM , Rating: 2
And I would also add that most general business users I know just add Microsoft Office to the above, that's it. I would think that Office would run just fine on a netbook, although I haven't tried it myself.

They run just fine with Office installed on them.

To the guy that thinks only people that wouldn’t buy a laptop would buy a netbook, you’re completely off base.

There are a lot of people that would periodically enjoy the mobility of a laptop (even if it is just to sit on the couch and surf the web while watching TV), but also want the horsepower of a desktop/powerful laptop for other times.

I won’t speak for others, but I am sure I am not alone. I like the portability of a laptop, even if it still stays plugged in while I sit on the couch and watch TV. But I want a big, quality screen with significant horsepower to do digital photo work. Prior to the introduction of netbooks, I compromised with a 17 laptop that had a less than ideal screen (for photo work.)

Before netbooks, it was financially impractical to buy a full laptop *and* a quality workstation. Now I have a netbook for surfing while watching TV and travel (DVDs, emulation, Broadcast HDTV recordings, downloading pictures from the camera, etc.) and I have a desktop with a quality monitor for photo work.

So while I might have compromised with getting another “full laptop” in the past, financially it was pretty much equivalent to buying a much better desktop screen for photo work, a desktop and a netbook. This setup fits my needs much better and (based on the popularity of the market segment) I would guess I’m not alone.

As for the article talking about artificially limiting netbooks by shackling themto data plans… …what a stupid idea. Hey, if you want to stop selling netbooks, just stop selling netbooks. Just don’t be surprised if a competitor comes in and continues offering them to the obvious market that is out there for them (anything more would be considered illegal, anti-competitive behavior.)


RE: No
By dxf2891 on 4/21/2009 9:13:49 AM , Rating: 2
My neice has one and asked me to "trick it out" for her. I loaded office and an internet security suite and all works well. I even went so far as to load Skype and she couldn't be happier. We got her a couple of 16GB thumb drives and she's good-to-go.

RE: No
By mixpix on 4/21/2009 3:06:59 PM , Rating: 2
This is the main reason. I talk to lots of people about my EeePC who just do basic computing and want something smaller.

RE: No
By mholler on 4/20/2009 11:45:31 AM , Rating: 2
The people buying netbooks are those that wouldn't have bought a laptop anyway.

I'd have to say that is only partially true. Some people who buy netbooks would have purchased laptops in the past simply because there was no other option. So, I do believe the proliferation of netbooks has had some impact on the sales of laptops, but to what extent is probably impossible to determine.

RE: No
By invidious on 4/20/2009 12:55:35 PM , Rating: 5
I agree. Unfortunately this article is very obtuse and assumes that people are somehow supposed to be supporting the laptop market. It should be (and is) the exact opposite. People are buying what suits their needs, the market supports them. If the laptop form factor is obsolete (and I dont think it is) then it will die as it should.

I do not see how this ASP has anything to do with the real world. The only thing that matters is sales and profits. I would say that if anything cheap netbooks are resulting in overall higher sales than would be expected during a recession. If this causes microsoft to lose money on potential vista sales then that is their own fault for not forseeing the market change and tailoring their OS to support it.

Bottom line is netbooks are a good thing for consumers, so they are here to stay. And M$'s next OS has a version built to support them, so they have a proactive plan. This story is basically a big waste.

RE: No
By dgingeri on 4/20/2009 2:37:16 PM , Rating: 2
I totally agree with you, Invidious. If the laptop makers are finding that their products are not being purchased, it is not up to the competitors to find a way to curtail their market, it is more that those laptop makers must adjust to fit their product to the market.

I have found myself considering buying one of those netbooks, when I have never considered myself has having cause to buy a laptop. Laptops were just too expensive for the limited use I would have, but a netbook has the capacity I would need for the limited use I would have, but not the huge price tag. For me, that's not eating into the market, that is filling a need.

Granted, some people who would have purchased a full laptop are getting a netbook instead. Perhaps they are losing a little bit, but that is not Microsoft's fault.

I'm thinking the crappy laptop market (the ones that cost <$1000, have Intel integrated graphics and celeron processors, can't do anything more than internet and e-mail on them anyway) is being eroded for the netbook market simply because the netbook fills the need better than the crappy laptops do.

There will always be a bigger market for more capable laptops, with discrete video and higher speed hard drives for business purposes. That market will not be eroded by netbooks.

RE: No
By Oregonian2 on 4/20/2009 3:15:33 PM , Rating: 2
I also agree -- but want to point out the pessimistic sort of position the article presents.

One also could just as well said that netbooks have SAVED the laptop business from disaster caused by the world economic collapse. Hallelujah!

RE: No
By Raidin on 4/20/2009 11:52:56 AM , Rating: 3
Think about this. In the past, there was no wide-spread alternative to a laptop. If you wanted some basic mobile computing, you shopped for the cheapest laptop that would do. Now we have netbooks, which in most people's eyes are even-cheaper laptops. Those who were forced to get cheap laptops because of no alternative are going for netbooks instead.

Makes perfect sense to me. I'd say that probably 80% (just a guess) of laptop buyers are looking for a mobile computing platform, and nothing fancy at that. They now have a product that even better fits that niche, netbooks. Now those who buy full-size laptops are those who want....full-size laptops.

RE: No
By inperfectdarkness on 4/20/2009 12:52:06 PM , Rating: 1
we need to look at netbook sales in relation to total home pc purchases; and also in relation to desktop sales for the same period. if desktop sales haven't increased at the same overall rate--then it stands to reason that some desktop sales are being pilfered by netbook sales (as well as notebook sales suffering).

quite frankly, laptops have been overpriced for a considerable amount of time (gateway the one possible exeption). where this issue worries me is because i'm a power-pc user. i want a top of the line mobile graphics card in my laptop. if the perception is that notebook sales are suffering--nearsighted CEO's may push to further inflate laptop prices...causing a futher collapse in notebook sales.

gaming laptops should have an ASP of $1500; not the $2500-3000 that currently exists. additionally, resellers need to "clear out" the garbage mobile GPU's that are 3,4, and sometimes 5 or more generations old (technologically) geforce 8200m anyone? anyone?

finally, laptops need to get better. no more of this "wxga" crap; that belongs to netbooks. notebooks should have standard:

top-tier mobile graphics cards
6-8gb ram
vista home premium 64bit

it's not like this stuff (materials cost) costs >$2,500; yet that's what they keep selling it like it is. in fact, the best laptop value on the market today (imho) is the sager 8662...which can be purchased at ~2k even with quad-core cpu & all of the above features (albeit only 4gb ram).

stop watering down the laptop offerings, stop pricing them for paris hilton's budget, and start offering quality in sizes other than 17".

p.s. 17" at 200dpi is wqxga. can we get some of these already?

RE: No
By Insomniator on 4/20/2009 1:59:33 PM , Rating: 3
This has nothing to do with the non-problem at hand. Gaming notebooks do not account for any significant percentage of laptops and I don't think people would want a 10 pound quad core/GTX 285 gaming laptop with 40 minutes of battery life even if it were only 1500 bucks.

The whole reason for this problem is that hardly anyone, including business users do anything more than web and email, which the netbook excels at.

Sorry PC manufactures, the vast majority of your market does not need or want anything more than a netbook. This is true for both home and mobile use.

Size, weight, battery life, heat >>> performance in terms of importance, when Firefox and Outlook are the only things open. Digital photography even only needs a P4 and a decent amount of memory to do basic photoshop (and most people don't even do that) just as well as a brand new machine.

The markets will simply adjust naturally based on demand. There will always be people that need powerful mobile solutions but really, no one is going to buy a $1500 dollar part when a $300(!) part does the job just well, good economy or not.

RE: No
By rdeegvainl on 4/20/2009 3:40:20 PM , Rating: 2
Gaming notebooks do not account for any significant percentage of laptops and I don't think people would want a 10 pound quad core/GTX 285 gaming laptop with 40 minutes of battery life even if it were only 1500 bucks.

Maybe not everyone, but plenty of people do. I don't care about battery life, I just want a machine that can game, and I can easily travel with.
The past few years I've averaged about 4 moves a year. 1500 bucks for a decent gaming laptop is exactly where I am looking.
Though I agree that the majority doesn't need more than what a netbook offers. They could focus on the netbooks and good desktop replacements.

RE: No
By Omega215D on 4/21/2009 11:00:15 AM , Rating: 2
Uhh, Gateway has you covered there. It may not be top of the line but it should still do well.

RE: No
By Zingam on 4/21/2009 12:19:55 PM , Rating: 2
You couldn't be more wrong! I would!
I want chea, powerful and sturdy notebook. I can live with it if it is heavy because I'll transport it by car. It is better for me to buy one such notebook than two PCs for the same price one for the office and one for home.
I don't need the battery for more than a backup during power outages that happen here too often.
I just need to be able to carry it around because it is easier than to move a desktop PC.
Actually the high prices of powerful notebooks is what prevents me from changing my 4.5 year old but pretty powerful notebook. I've paid for it alot but it is still quite useful and I could keep it for another year if it doesn't break till than. I just hope I can jump to quad core notebooks directly.
If prices were lower I would replace my notebooks more often.

RE: No
By judasmachine on 4/20/2009 1:07:13 PM , Rating: 2
I agree. I wouldn't have bought a laptop if it wasn't for a netbook that would do what i need it to. Laptops are always overpriced for what I need. MS you still got a customer out of me, as it came with WinXP Home. Before this I just used the laptop my g/f was given at work.

RE: No
By psychobriggsy on 4/20/2009 1:54:28 PM , Rating: 5
I disagree, a little.

I think people are buying netbooks for portability and casual use, and potentially will move back to desktops for the home system, instead of compromising on a laptop as they do now.

There are also a lot of gadget hounds out there, so yes, there will be a lot of people buying something new because it's new and cool.

RE: No
By atlmann10 on 4/20/2009 2:07:30 PM , Rating: 2
I actually see this as a normal market path. As the digital world grows more and more mobile. If the people talking about this on an industry level just wait. When the Nvidia 9400gpu systems get released with a dual core ATOM especially in a platform like the MSI Xslim products there laptop margin will collapse. This will happen on a large scale because they will make at least in a mobile market a high end laptop absolutely unnecessary. This in many ways has nothing to do with the hardware market in a large way. The software is the killer here and that market is nowhere near the hardware's capabilities in a great way.So consumers see and have basically no need to get a computer with higher capabilities except in very specialized markets, these generally being Gaming, Media manipulation, physics or other scientific processing, and CAD/architecture/accounting type needs. Even in those markets the need for the hardware is rather slim. Then who uses a mobile solution for that maybe 2-3% of a specialized part of a specialized market if even that.

RE: No
By myocardia on 4/20/2009 9:24:11 PM , Rating: 2
While I totally disagree about the music (I think ~50% of all stolen downloaded music would have been bought, eventually), I think you're completely right about notebooks. Here's why: I've owned a computer continually since 1980 (before IBM released the first PC), and recently bought my first notebook, a netbook.

See, while I would have loved having a mobile computing solution before Feb. '09, and could have actually afforded one, the price:performance ratio just wasn't there. I've got multiple multi-core desktops for any heavy-duty computing I need to do, gaming, etc. And honestly, being able able to be online when I wasn't home wasn't worth $500.

As a matter of fact, it wasn't worth the $400-450 that the Asus Eee's with an actual hard drive were selling for, either. If it weren't for being able to buy an MSI Wind for ~$300, I still wouldn't own a laptop, and that's after 29½ years of owning a PC.

RE: No
By goku on 4/24/2009 1:33:11 PM , Rating: 2
you could've bought a used laptop... With a used laptop, you'd have the performance, battery life, ports, and screen size, all at the netbook or lower price point.

RE: No
By zaaf on 4/20/2009 10:08:53 PM , Rating: 2
As an IT consultant, I have several clients that want something small and light to travel with and not something that can process like a gamer would need. To accomodate that need, Netbooks are recommended. There are also those (believe it or not) that are not tech junkies and spend their time perusing DailyTech and the sort. Those people don't mind machines that just perform mundane tasks.... i.e. browse the Internet for news, check email, etc. Again, another prospective Netbook user that would have purchased a laptop in the past.

RE: No
By xSauronx on 4/21/2009 2:51:04 PM , Rating: 2
Actually, I went from a T60 Thinkpad to a eee 1000H because its "good enough" and easier to carry around and I have a desktop.

Finally hitting the apex?
By 7Enigma on 4/20/2009 2:25:04 PM , Rating: 4
It's been brought up almost every new generation of software/hardware, but I really feel we are hitting an apex in terms of computing need and computing power (both laptop and desktop). XP and a Pentium M cpu with 1-2gigs of ram is more than 99% of the consumers need. This changed with Vista. Vista pretty much overnight did what all hardware manufacturers pray for....a need. It crippled notebooks that were getting by fine on XP, and the cycle continued.

The truth is for years we've always had a need for more performance, and IMO the driving factor has been because of monitor resolution (when the OS wasn't to blame). 15" monitors with 640X480 or 800X600 resolution really wasn't that great for upclose viewing and so there was a practical need for more performance. The problem is 19" monitors are pretty much perfect for the general viewing distance of 2-3 feet. Anything more than that is really just overkill. Sure gamers and deveopers want the 22-30" behemoths, but the general consumer has no need for larger viewing area.

But this wasn't going to be a problem for manufacturers if Windows 7 was going to follow the general Microsoft trend of increased hardware requirements. But a monkey wrench was thrown in with Windows 7. I don't think anyone dreamed of an OS that was gentler on the hardware requirements than the previous version. When you've reached the point where the monitor size is adequate, and when you have a new OS that runs better than Vista, what is your NEED?

The truth is, there isn't one. And in this economic situation, it makes it even worse. Vista is a very nice OS now and happens to be very secure for the general consumer that is click happy. Windows 7 is likely to not get worse in the security standpoint, and with the weaker system requirements, laptops and desktops that are currently running Vista have no need to upgrade specs as they would get a "free" speed boost by going to 7 (or just sticking with Vista as few people need a new OS in the first place).

There will always be a need for new computers (students, kids moving away from home, people that want the newest and greatest), but the general trend for the next couple of years (again IMO) is drastically different than before.

I think hardware manufacturers' best angle to stem this future is malware; at least then they can crud up an older system to make the person believe they need a new system. But if the average consumer learns that they can spend a bit of money, or have a techy friend to reinstall the OS, they are in big trouble.

*This is coming from a gamer who only installed Vista for DX10 (which to date has not been worth the price of entry).

RE: Finally hitting the apex?
By dastruch on 4/21/2009 7:14:12 AM , Rating: 2
We are very far from hitting any apex yet in technology at all levels.

I would be glad to remind you about your post in let's say 15 years.


Netbooks are toys
By Beenthere on 4/20/2009 11:26:11 AM , Rating: 1
Where once laptops were toys for the cellphone generation, now netbooks are the toys of choice. Laptops are still purchased for Biz and real PC use.

RE: Netbooks are toys
By xti on 4/20/2009 12:39:24 PM , Rating: 2
in todays layoff happy corps that are constantly replacing their workers mobile boxes? 'real pc users' are always a tiny tiny majority similar to gamers, a/v, and all other 'genres'.

the dells and hps of the world selling notebooks IS the measuring stick. It isn't like the server market.

RE: Netbooks are toys
By xti on 4/20/2009 12:40:11 PM , Rating: 2
woops, is = are

Buying what they need
By nafhan on 4/20/2009 11:42:25 AM , Rating: 2
For the vast majority of computer users, the netbook does everything that they need. People realize this, and appreciate the small form factor and low price. Do Grandma or Ms. "I've got 500 friends on Facebook" need a fast quad core processor and 4GB of RAM? No!

Eventually, I think the market is going to be segmented between cell phones that do all the computing most people need and desktop workstations that provide computing for power users (who will still use cellphones for day to day computing).

RE: Buying what they need
By mholler on 4/20/2009 11:50:46 AM , Rating: 2
To be honest I don't see cellphones taking over the mobile computing space anytime soon. The reason is simply related to screen size. Even basic users like to watch videos on youtube and such, and a hand held screen is not the preferred medium for doing that.

By DrRap on 4/20/09, Rating: 0
RE: (desk+net)top
By kmmatney on 4/20/2009 1:12:44 PM , Rating: 2
Well, I use a notebook for everything - "heavy" work, and be mobile computing. A 2.4 Ghz Core 2 Duo is good enough for heavy work - in my case, scientific X-ray data fitting and instrument control programming. My notebook has DVI out, and is plugged into a 27.5" LCD for everyday work with external mouse and keyboard, but it also works well on the road.

RE: (desk+net)top
By kmmatney on 4/20/2009 1:14:03 PM , Rating: 2
Of sourse, my company bought my laptop, so I wasn't spending my own money, so spedning $1400 on a laptop was no big deal. If it was my own money, then I might have purchased something else...

Comes down to practicality
By viperpa on 4/20/2009 2:33:56 PM , Rating: 2
As some have said, it comes down to practicality. Your not going to buy a $2,000 laptop just to look at emails and browse the web. I have been thinking about getting a netbook to replace the Dell Axim that I currently own. Even though the netbook is larger than the Dell Axim, the netbook is still more useful than the PDA.

RE: Comes down to practicality
By TomZ on 4/20/09, Rating: 0
RE: Comes down to practicality
By Belard on 4/20/2009 7:48:24 PM , Rating: 2

The CelPhone already destoryed the PDA market.

They still make Palm PDA... you get a lot for $100 nowadays. Its only plus is that the screen is larger than typical celphones. But the same $0~150 celphone does photos, videos, music, records and... is a phone ;)

Slightly more drop than before
By ET on 4/20/2009 4:08:36 PM , Rating: 2
Did a web search, and found which says that from 2006 to 2007 prices dropped 14%. Notebook prices drop because they've become mainstream. Same happened with desktops. Every desktop I bought since 1994 (my first PC) was less expensive than the last.

Sure, netbooks play a part in this, but IMO without any netbooks on the market, you would have seen either a similar ASP drop or a drop in sales, or both.

Netbooks do canibalise one sector, and that's subnotebooks. Those have been traditionally exceptionally expensive, and now we can get something similar for a fifth of the price.

RE: Slightly more drop than before
By ET on 4/20/2009 4:10:40 PM , Rating: 2
Another link: -- 17% drop in notebook ASP from 2004 to 2005.

Yes, 20% is a little more, but this can be an expected result of the economic crisis. Tying this to netbooks is silly.

perfect desktop companion
By Jeffk464 on 4/21/2009 1:19:59 AM , Rating: 2
I think netbooks are the perfect desktop companion. A lot of people prefer desktops for their computer gaming power, better monitors, or their better keyboards. These netbooks are a great deal for desktop owners who have a need to have something that is portable from time to time.

RE: perfect desktop companion
By MScrip on 4/21/2009 2:12:56 AM , Rating: 2
I think netbooks are the perfect desktop companion.

I feel the same way. I've always had desktops... never owned a laptop. I will be building a new desktop this summer... and getting a netbook too.

I'll have desktop power where I need it the most (at home doing video editing) and a netbook to throw in the suitcase to check email, surf the web, and dump digital camera memory cards on the road.

Other Reasons
By TomZ on 4/20/2009 11:25:33 AM , Rating: 2
While I'm sure that netbooks are causing some portion of the decline in notebook ASPs, I'm sure it is not the only reason. Two other reasons that come to mind quickly are (a) the global recession, and (b) very robust competition. I'm sure these two factors, and maybe some others, are also affecting ASPs.

New Tech
By techone on 4/20/2009 11:33:14 AM , Rating: 2
New Tech - new tech always gets more buzz and is touted as the next killer of older equipment. The forsight on this seems to not have been really laid out giving the factors involved:
- Cost
- Size
- Usefulness

I would see this as a knee jerk reaction which is typical when the 'industry suffers' in one dimension or another. Adding contracts to netbooks will kill the idea for many many people, myself included.

Agreed also that the notebook market will never truely disipate due to the business sector buying these things and that is truely where the margian lies for bigger companies anyhow. Having worked at a certain manufacturer in sales I can personally tell you back in 2002 they sold PC's with negative margian and I'm sure it is no different today since PC's are half the cost they were.

Corporate capitalistic BS
By n0nsense on 4/20/2009 11:56:15 AM , Rating: 2
I really impressed with "lock customer to ...".
From my personal point of view, current computers have much more horsepower than average user needs. But he must pay "taxes" to Intel/AMD, AMD/Nvidia, Microsoft/Apple and others.
The point is to get what you need for a reasonable amount of money. I wont buy current generation of netbooks since they can't do what I need and will stay with my almost 6 years old X31. But i will buy something like touch book from always innovating
It is not cannibalization ! as posted above, most netbooks sold to people that wouldn't buy notebook. Why? since similar sized notebook will cost up to 10 times more. The argument that notebook can do more is not valid since people don't need most of this "more". at least not for this price tag.

By A Stoner on 4/20/2009 1:41:18 PM , Rating: 2
There are many reasons people buy these products, and it is possible that netbooks are eating some laptop lunches. For me, when i go to look at a new purchase, I decide what I need it for, how much that is worth to me, and then go looking for something that meets my needs.

For a laptop, I want something I can replace my desktop with, and I use my desktop mostly for gaming, so I would go for a huge desktop replacement portable, like the Dell XPS 17". Thus, for this instance, a netbook would be totally inadequate and would never get a look.

For a GPS unit however, I want something that fits in my car easily, has a big enough screen to give lots of information, and can surf the internet for new maps, hotels and places to eat and so forth. TomTom just does not fit this bill as they come in 4.3" models, and surfing the internet, I am not sure they do that, and if they do, must be hard to interface with, not having any keyboard. A full sized laptop might fit the bill, but the pricetag is too much of a bill. Here I think a smaller Netbook would be a perfect item.
Many families have many people that all want to be able to do things on the internet, and while owning a desktop and maybe a laptop is doable, when they need to expand the access to 4, 5 or more people, space for desktops becomes a limiting factor, and price of laptops is also a limiting factor, so three or four low priced netbooks along with the primary desktop and a portable laptop would make a great combination.
When a laptop or inferior but pricey single application devices are the only two choices, many times people will chose one or the other or just simply decide not to buy at all. When the choice includes a pretty powerful multi-purpose reasonably inexpensive netbook as a choice, many people will of course chose the netbook, and this is going to take sales away from the Laptops as well as the single application devices, but it will also open up a new customers.

Stupid report
By Lonyo on 4/20/2009 1:47:49 PM , Rating: 2
Netbook sales could be argued to be keeping computer sales fairly afloat.
If you consider that sales of larger ticket items (which I would include computers in since ASP is ~$500) are likely to have been dropping off due to economic considerations (just look at how every other market is having problems), you could argue that without Netbooks, overall revenues would have dropped even more, and while ASP's would have remained high, the volume would have gone nowhere and companies would have suffered very poor sales.

Talking about netbooks cannibalising notebook sales in a broader context is kind of silly. As someone mentioned, half these people probably wouldn't have bought notebooks because they wouldn't want to spend that much money, and might have gone without, or waiting until their financial situation was better.
the numbers show a significant 6.5 percent year-over-year decline in PC shipments worldwide for Q1

Who wants to bet that without netbooks that number would be higher?
Before saying that netbooks are doom and gloom for the industry, wait until things are more normal in terms of market conditions, and see how things work out.
It's too early and the wrong time to be saying anything about what netbooks are doing to notebook sales.

By Jimbo1234 on 4/20/2009 2:06:43 PM , Rating: 2
Why spend more when yo don't need more? And the last time I checked, a netbook is still a notebook/laptop. I used one a few weeks ago with XP to run motion control software.

By davekozy on 4/20/2009 6:14:03 PM , Rating: 2
Another problem with ever faster CPU's, GPU's, and RAM is the bottleneck created by the hard drives, optical drives, and internet. My CPU could be ten times faster than it is but it'll still be waiting for data from the drives to have something to process.

SSD's will help some in a couple years when the price comes down to mainstream levels. I don't see the net speeding up much any time soon because most of the companies aren't willing to invest in the necessary infrastructure improvements. I live in a city of over 40,000 people and the best I can get is 8 Mbit Comcast.

oh noes!
By philmax on 4/20/2009 7:30:28 PM , Rating: 2
we can't let consumers dictate what they want and buy it, the economics makes too much sense!

They should be glad.....
By jabber on 4/20/2009 8:09:47 PM , Rating: 2
...they are at least selling something!

If cheap netbooks didnt exist chances are at the moment they wouldnt be buying as many of the more expensive notebooks.

Cant have it both ways. People are happy with cheap and cheerful right now. If it lasts a couple of years that will do .

Netbooks are good for their market
By Belard on 4/20/2009 10:51:11 PM , Rating: 2
A year ago, I bought a $600 ThinkPad with XP. One reason, it had XP preinstalled off the shelf.

I think that XP on these netbooks is also helping to drive sales as they are the only mainstream (best buy, frys, compusa) computers that a typical person can find easily with XP installed.

When I look at a typical netbook at $350, especially the IdeaPad which is well made, I would have bought one rather than my 6lb Thinkpad. The Netbook would have done what I needed and for less money. Wirless networking, display videos and photos and web browsing while in court. It's 1/4 the size of my ThinkPad (which I do like very much), but the advantage to size/weight would have been worth it. Last year, only ASUS and MSI had netbooks on the market.. they were quite slow and (sorry) were cheap and looked cheap.

I'll never see a notebook as a good desktop replacement, even thou many do. Its handy to be able to take your computer with you. Personally, that would SCARE the crap out of me. What HAPPENS if/when your notebook is STOLEN or destoryed? Desktop computers are rarely stolen - they're bulky and heavy at roughly 15~20lbs. But its way easier to snatch a 4~9lb computer.

With a netbook, its your portable computer. Excellent for those of us that use desktops are our main computer. How many notebooks have 24" screens... 1 or 2... and they are completely non-upgradable and are rather expensive... starting at $1400 for an HP. Not very portable and very heavy... it'll never compete against a $600 PC with a $300 24" LCD monitor in performance.

Also with netbooks, have them access a shared drive or NAS and you have a portable media player with its 10~11" screen... battery life is usually quite good since theres no optical drive and especially those with SSDs.

When a $250~350 netbook gets stolen, damaged or lost and doesn't "have your life on it", its easy to replace with far less worry or stress.

Imagine someone with a $2000 Mac notebook losing their Life-Computer? Aaaaaaaaaaaaaaaaaaaaaahhh!

By paydirt on 4/21/2009 10:57:37 AM , Rating: 2
I think the lowering of the price difference between laptops and desktops was only natural. For the average user, portability is only worth so much (varying from user to user) and when you have inferior hardware at a higher price it was bound to change.

As long as the hardware in laptops is inferior to closely priced desktops, the price of laptops should continue to converge and maybe even be lower than desktops.

It still IS a luxury to have mobile computing, though mobile computing is increasing.

Laptops were over-priced, so the capitalist economy finally is forcing them to lower their prices to something reasonable. Nothing to be alarmed about.

If they add mobile contracts or collude in other manners to support laptop prices or margins, they will further incentivize consumers to either use netbooks or desktops.

Welcome to the revolution
By mixpix on 4/21/2009 3:05:44 PM , Rating: 2
Evolve or die!

Netbooks will kill the open PC.
By reader1 on 4/20/09, Rating: -1
RE: Netbooks will kill the open PC.
By rdeegvainl on 4/20/2009 12:01:40 PM , Rating: 5
I think I need to adjust my tin foil hat, cause I can't seem to pick up on the frequency you're putting out.

RE: Netbooks will kill the open PC.
By akugami on 4/20/2009 3:22:27 PM , Rating: 2
That's gotta be a 6. And make that part of the quote rotation in the bottom of the blogs.

RE: Netbooks will kill the open PC.
By Pirks on 4/20/09, Rating: -1
RE: Netbooks will kill the open PC.
By TomZ on 4/20/2009 4:47:08 PM , Rating: 2
Whoa, Pirks would bet on an Apple ARM based netbook? What a surprise!

Seriously, Apple would be foolish to come out with a netbook - foolish unless they could get people to pay $800 for it. Oh wait...that might actually work...

RE: Netbooks will kill the open PC.
By Pirks on 4/20/2009 7:16:24 PM , Rating: 2
that might actually work
Well, even TomZ agreed. I may be onto something then!

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke
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