The Net Impact of Netbooks? It Depends on Who Uses Them for What

PC makers Hewlett-Packard, Dell, Lenovo, Acer and Asus are increasingly thinking big about small netbooks - portable computing devices that can cost anywhere from $200 to $500 and depend on the Internet for many computing tasks.

These small devices are a bright side to what analysts expect will be a slow year ahead for computer demand. Indeed, research firm iSuppli on November 20 projected that global PC shipments will rise 4.3% in 2009, down from its previous forecast of 11.9%. iSuppli also reported that notebook shipments will still increase 15% in 2009 largely because of growth in the netbook segment. Research firm IDC estimates that 10.8 million netbooks will ship in 2008, just about a year after Asus launched what is considered the first device in the category, the Eee PC. Asus has a 46% share of the netbook market, according to IDC.

The netbook has been championed by Intel, which created a line of microprocessors, called Atom, to control them. However, the term "netbook" is often used to refer to a broad range of devices. Netbooks are mobile computers with screens ranging from 5 inches to 10 inches. Originally intended principally for the education market, they typically run Linux or Windows XP and need to connect to the Internet for heavy computing tasks. The terms "netbook" and "mini-notebook" are often used interchangeably. Prices generally are lower than $500 and, in some cases, consumers can buy them at toy stores. For instance, Asus' Eee PC is sold at Toys "R" Us.

Analysts and experts at Wharton agree that netbooks will be disruptive to the PC industry, but it's not clear in what way. Will netbooks poach sales of laptops? Are netbooks replacements for smartphones? To what extent will the weak economy affect sales? Will netbooks increase the popularity of cloud computing in which users store files on the Internet and manage them with web-based applications? And how will netbooks impact the business models of key players such as Microsoft, Intel and other industry leaders? Meanwhile, the idea that a computing device will depend on the Internet for computing power isn't new. So-called thin clients -- terminals which depend on networks for access to applications -- have been around for years and are championed by companies such as Wyse Technologies.

It's too early to know where netbooks fit or how well they will ultimately sell among consumers, who are projected to buy about 70% of these devices, according to research firm Gartner. Technology vendors such as Intel and Dell expect netbooks to fit in between smartphones and laptops. In their view, netbooks will become primary computing devices in emerging markets and complements to traditional PCs in developed markets.

Associated Link: More: The Net Impact of Netbooks?

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