Disrupting the PC: the rise of the netbook
The netbook, also known as the mini-notebook, is likely to be the fastest growing PC segment in 200920. It may represent in excess of 15 percent of all portable PC sales, or roughly 25 million units21.
As of the start of 2009, the established definition of a netbook was a notebook computer with a low-powered x86-compatible processor (compatible with PC standard software), small screen (no larger than 10 inches), small keyboard, equipped with wireless connectivity, lightweight (under three pounds) and no optical disk drive. Netbooks are typically low cost, relative to other notebooks.
The appeal of netbooks has been categorized as making "great second computers for normal people, third computers for techies and first computers for children"22. Netbooks have become a favorite of travellers, who like their small screens and keyboards, especially on planes23.
In 2007, hardly any netbooks were sold. At the beginning of 2008, a few manufacturers offered netbooks; by year-end, most manufacturers offered them or planned to, and sales were forecast at 11 million, or 7 percent of the market24. At the time of writing, 8 of the top 10, and 14 of the top 20 selling mobile PCs on Amazon's US site were netbooks25.
Netbooks are expected to affect computer industry revenues materially and adversely, due to their low average selling price, which during 2009 could fall below $250. In 2009, despite probable growth in unit volumes, global PC sales measured in US dollars may fall for the first time26.
At first, netbooks do not seem to be fundamentally changing the way PCs are used. But over time the idea of inexpensive, portable PC-equivalents is likely to create new applications and uses for the PC.
The netbook's architecture will also be used in non-mobile PCs, known as nettops. This may further deflate the value of the global PC market in 2009. However by year-end 2008, there were some early indications that nettops may not emulate the success of netbooks27.
Netbooks are likely to feature a wide variety of operating systems (OS) in 2009. The first netbooks were predominantly Linux machines, but as of year-end 2008, only about 30 percent still were28. However, Linux's share of netbooks could fall further in 2009: its returns rate was markedly higher than competing OS in late 2008, a trend that may have prompted some manufacturers to consider ceasing sales of Linux netbooks29.
The netbook's lower price point and its portability is likely to be causing wireless carriers to view them as being equivalent to large smart phones that merit subsidization to lock in wireless data subscribers. Subsidies for netbooks are likely to become available in North America in 2009, and have already been popular in Europe in 200830. Half of Europe's netbook sales were made by a telecommunications operator. A quarter of netbook sales in North America could be via carriers in 2009.
In 2009 the momentum behind netbooks should grow. First generation netbooks with suboptimal processors and insufficient storage are likely to be replaced by improved models with better processors and adequate hard drives.
Bottom line
PC manufacturers should pursue the netbook opportunity, but with care, since this approach could threaten already thin margins31. They should consider the market for premium netbooks, whose appeal may be aesthetic rather than technical32.
Netbook manufacturers and distributors should make it clear to consumers what buying a Linux machine entails - and then be willing to offer support for those buyers. Initially high sales of Linux netbooks suggest that there is a market there, but the high returns indicate that more education of non-technical purchasers may be required.
OS manufacturers have already disclosed that the success of netbooks - which use non-premium versions of the OS - can have an adverse impact on margins. Their response should be to develop OS that are designed specifically for the netbook market33.
Other technology companies should be poised to take advantage of the proliferation of a new generation of inexpensive low-power CPUs. These are becoming much cheaper with better performance, thanks to the popularity of netbooks. Over time these chips may 'leap the fence' and proliferate in the embedded, consumer electronics and smart phone markets - with unit sales measured in the hundreds of millions and revenues in the tens of billions of dollars.
Manufacturers of home-media systems, DVRs and games consoles should take advantage of the new CPUs to reduce their bill of materials. On the other hand they need to make sure they take steps to prevent their proprietary devices from being supplanted by a general purpose device.
IT departments could deploy netbooks instead of conventional PCs for office workers. Netbooks could replace field force workers' clipboards or PDAs.
Carriers should consider incorporating netbook subsidies into their current cash-flow estimates. They should also analyze the impact wireless data usage driven by netbooks could have on the network34.
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