Welcome to Netbook Nation

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Once upon a time, the smallest mobile computers came with the most outrageous price tags. Those days are over. While you can still push a MacBook Air and a Dell Adamo beyond a few grand, the era of four-figure machines is drawing to a close.

Desktop sales are crashing, and laptops aren’t far behind. Suddenly, the cheapest machines also are the smallest. Whether they want to accept it, chipmakers and hardware vendors now live in a low-margin world. And PC buyers have new choices at their disposal.

Figures recently published by Gartner point to a change of demand in the client-machine market. Netbooks emerged almost out of nowhere in 2008, with 11.7 million sold. Gartner estimates this figure will almost double to 21 million units this year. Paired with an estimated 9.2 percent drop in overall 2009 PC sales, it’s clear we need to rethink why we buy certain machines and what we expect to do with them.

It’s easy to assume that netbooks’ popularity is being fueled by a recession-wracked market; however, demand has been building for years. Increasingly mobile-centric consumers and businesses are clamoring for devices that fill the gap between smart phones — highly portable, but still somewhat feature limited — and basic notebooks — fully capable, but still difficult to carry around.

Solutions such as the Ultra-Mobile PC (UMPC) and the Mobile Internet Device (MID) have landed with a thud because, while they were largely able to bridge the size/mobility/capability gap, they cost more than a midrange laptop.

While vendors were throwing new form factors at the wall, the market already was beginning a seismic transition away from its desktop/laptop bread and butter. Growth in conventional desktop and laptop PC sales was flattening in developed markets. Everyone who needed a machine likely had one, and the slowdown in the horsepower wars gave buyers less reason to rapidly upgrade to the next big thing.

Emerging markets, such as China and India, have long offered growth-hungry vendors ample opportunity to maintain global growth as demand in mature regions such as North America and Europe maxes out. Unfortunately for hardware vendors, these emerging markets have limited interest in conventional PC-based form factors. If anything, massive growth in these places will bypass desktops and laptops completely as these suddenly wired and wireless consumers focus on next-generation smart phones.

Enter the netbook. It offers much of the functionality of a typical notebook PC without the bulk or the price. While a $300 price point for a device that looks a lot like a shrunken laptop has already attracted huge market interest, this is only the beginning of the revolution.

Savvy wireless carriers — with ample experience selling subsidized handhelds bundled into two- and three-year subscription contracts — are eyeing netbooks as the basis of a lucrative new revenue stream. Early results, such as AT&T’s experience in Atlanta and Philadelphia, indicate the shift may already be under way. By selling netbooks for as little as $49, AT&T is attracting national attention for busting traditional cost assumptions.

The stunningly low up-front price comes with a huge catch, however: lock-in to a wireless service contract that, when everything’s tallied up, can easily top $1,500 over the life of the agreement. Still, to consumers long accustomed to monthly service charges for everything from cable television to cell phones, netbooks could represent the next logical step toward a totally service-based model.

Of course, with netbooks running nontraditional operating systems sold through nontraditional channels by nontraditional vendors, our traditional assumptions of what questions to ask, what to buy and what these machines will be capable of are being turned upside down. You may want to keep the following in mind:

  • Netbooks don’t have the processor capability, memory or storage capacity to replace desktops or laptops.
  • Limited expansion capability means many netbooks can’t easily drive a complete set of full-sized peripherals.
  • You wouldn’t want to pound out a novel on their tiny keyboards.
  • Small, relatively low-resolution screens force a lot of scrolling.
  • Total cost of ownership can easily exceed that of a traditional laptop once you factor in relatively expensive data plans.

In their current form, netbooks are complementary devices only, so don’t be swayed by the fire-sale price. If you’re not careful, you could end up paying a lot more while getting a lot less than a supposedly high-end conventional machine.

For buyers willing to do some homework, the arrival of netbooks gives them more choice than they’ve ever had before — and that’s always a good thing. 

Carmi Levy is a technology journalist and analyst with experience launching help desks and managing projects for major financial services institutions. He offers consulting advice on enterprise infrastructure, mobility and emerging social media. He can be reached at editor (at) certmag (dot) com.

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