Netbooks - Threat or Opportunity?

(By Richard Holway)
In 2003 I bought myself a Panasonic Toughbook which weighed in at just over 1kg and cost £1800. It’s been around the world many times with me and still works fine. It’s my communication device of choice when I’m travelling – either connecting via WiFi or my Vodafone dongle. It’s also my photo editing suite and my travelling archive even though it only has a 20mb HD. I can write UKHotViews on it – something that is still near impossible on my Blackberry. It’s great at surfing the internet. It runs full XP which, bluntly, I both understand and is all I need.

I could buy a new Panasonic CF F8 Toughbook for upwards of £1500 or I could buy a Netbook with all the features (well actually a 120mb HD and much enhanced performance) and weight of my current model for around £200. I could have 8 Netbooks for the price of one Toughbook!

Welcome to the new wacky world of Netbooks. Businessweek today has a really good article entitled Invasion of the Netbooks. IDC reckons 11m Netbooks will be sold this year – up from 182,000 in 2007 (my calculator can’t handle that kind of % growth)

Sounds great? It probably is if you are consumer like me. But if you are a manufacturer or supplier, it’s a nightmare.

Firstly, Netbooks are cannibalising the ‘proper’ laptop market- as my own case above illustrates.
Secondly, the margins on Netbooks are slim. Even Microsoft makes ‘just’ $15 per unit from Windows sales. Of course, many Netbooks are Linux-based which adds to Microsoft’s woes.

IDC reckons the average price per PC will drop by 12% in 2009 mainly due to Netbooks. All this will drive down the total size of the IT market considerably as consumers (and quite a few corporates) buy “More for Less”. Great for us users - a bit of a problem for many others.

Footnote - Dell issued its Q3 figures 'after the bell' on Thursday. Revenues were 3% to c$15b - somewhat below analyst estimates of $16.2 billion "dragged down by slower spending by corporations. In the Americas, Dell's largest region for sales to businesses, revenue dropped 8%". See Dell misses on sales, tops on profits from CNNMoney.

Concerning the Netbook story above, I note that "Dell's consumer PC revenue increased 10%worldwide as unit shipments jumped 32 %". Do the maths on that and it equates to a 17% price reduction per unit. Pretty amazing stuff!

Sony added to the gloom saying that it expected a lacklustre Christmas season.