Is the computer industry shooting itself in the foot with the netbook?

29 Jan 2009

Just one year ago, netbooks were still a novel concept – the now legendary minuscule Asus Eee PC was just beginning to generate buzz, while mainstream PC manufacturers such as Dell, Hewlett-Packard and Acer were yet to release their versions.

Fast-forward 12 months to January 2009 and the public is spoiled for choice with the range of netbooks on the market. Various screen-sizes, hard drives and operating systems are on offer, but all netbooks have one thing in common – they’re cheap.

For the first time in the history of computing, we can really say affordable computers are now within almost everyone’s reach as the average netbook sells for under €400.

How is this affecting the market? In 2008, 10 million units of ultra-mobile devices (this encompasses netbooks and Mobile Internet Devices) were shipped, according to a report by US technology market research firm ABI Research.

This is expected to swell to 200 million by 2013. If consumers are buying netbooks – which currently make up 90pc of all ultra-mobile device sales – what happens to the garden-variety laptop? Is the computer industry cannibalising itself? Is there room for the high-end notebook anymore?

Aaron McKenna, Ireland country manager of online tech store, says the allure and limitations of the netbook are pretty clear: “It’s cheaper than a regular notebook, but you get what you pay for, which is less real estate on the screen and less power under the hood.

“It’s ultra-portable, which is the first big draw for many users seeking a complementary device for a work environment.

“It’s low price-point makes it attractive for someone just looking for a computer to take Bebo to bed with them, who might already have a desktop or have no real need for the full size and power of a regular notebook.”

While the runaway success of the netbook could lead the industry to believe that the sales of ordinary laptops are bound to suffer, according to Mark Gorman, director at Deloitte’s TMT group: “If there is a demand for netbooks, then PC manufacturers have to react to that.”

However, these devices are not being marketed in the PC or laptop space, he says, but rather somewhere in between the laptop and PDA.

“In the short term, netbooks are unlikely to have a material effect on the market for high-end laptops because people who use netbooks are buying them for a completely different purpose – they are low-cost and portable.”

While take-off was slow in 2007 and 2008, Gorman says the netbook will gain momentum in 2009 as manufacturers react to a consumer trend. However, the impact on laptop sales will depend on a few factors.

“One of the most important features of netbooks is network connection, and the usability of netbooks will depend on high-quality mobile broadband coverage and penetration. In an Irish context, that’s been lacking.

“Speed of mobile broadband may dictate how well netbooks will sell in different markets.”

McKenna says in the long run netbooks most likely will not see the computer industry cannibalising itself because these devices are filling a unique gap.

“I think there are two types of netbook user. The person who has a desktop or a laptop but also wants the portability of a netbook, at which point it’s very much a complementary device.

“The other is a person who wants a netbook for simple tasks, primarily internet browsing, at which point the netbook is the primary computer, but well able to do the jobs it’s being asked to do,” explains McKenna.

One interesting development in the burgeoning netbook market has been the noticeable absence of Apple.

Last week, Apple COO Tim Cook said of the netbook experience: “We think the products there are inferior and will not provide customers the experience they’re happy with,” while adding that Apple was watching the space.

“Apple is good at taking its time, watching competitors make mistakes, learning what consumers want and waiting for the right time to hit the market,” says Eoghan McCabe, CEO of web development firm Contrast.

“Apple is right; the netbook experience isn’t up to scratch yet. There are a lot of trade-offs. If Apple releases a netbook, any compromises will be worth it.”

Meanwhile, McKenna has high hopes for the ordinary laptop: “The laptop will continue to grow and dominate the market. The age of the desktop in the consumer space is coming to a rapid end, except in a few areas, such as gaming and other high-intensity jobs.

“Notebooks are increasingly capable of handling the tasks given to them by the majority of people – namely internet browsing, media and limited gaming. They’re also portable, making them more convenient to use, and they’re the same price or cheaper than desktops,” he says.

“For €399 you can get a mid-range notebook that can handle itself perfectly well, and you don’t need to buy a screen, a keyboard and a mouse on top of that.”

By Marie Boran