Netbooks Aren't Such a Hot Ticket

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The conventional wisdom in many industry circles is that tiny netbooks, although great for some users, represent a disaster for the PC-and-notebook industry.

Some claim that people are choosing netbooks as an alternative to larger systems. Another complaint is that ultra low-cost netbooks are driving down the prices vendors can command for otherwise higher-margin desktop PCs and full-size notebooks.

Microsoft blames netbook sales on lower revenue for client software. Specifically, they say they've had to lower their price for Windows XP and Windows Vista for netbook systems to compete with very low-cost Linux alternatives.

The idea that netbooks are damaging the industry is totally wrong. In fact, the industry should love netbooks. Here's why.

I believe there are four powerful forces conspiring to drive down desktop PC sales:

1. The economic meltdown. People aren't buying anything nowadays. Car sales are down. Luxury goods of all types are in the toilet. Desktop PCs are particularly vulnerable because most people already own functioning systems, and consider upgrading simply for better performance to be a needless and costly luxury.

2. A long-running trend from desktops to notebooks. As notebooks have increased in power and declined in price over the past decade, their relative sales have risen compared with desktops.

3. Windows 7. Microsoft has been far more vocal about Windows 7, and many people are waiting for it now.

4. A lack of innovation generally. Desktop PCs are the least innovative areas of consumer technology. For the average user, literally nothing compelling has happened in the desktop PC space since flat-screen LCDs. One WIRED blog suggests that netbooks are "killing PC innovation." I think the opposite is true. I think PC vendors aren't innovating, and that's contributing to the general public apathy toward PCs.

And items 1 and 3 above are also impacting full-size notebook sales.

Meanwhile, there's little to no evidence that most people buying netbooks are doing so instead of, rather than as a supplement to, desktop PCs or netbooks. My observation is that from road warriors to soccer moms to college, high school and even middle school students are buying netbooks either as a supplement to a full-size system or as an alternative to buying nothing.

And netbook buyers are right. Netbooks are fine for occasional use in places where a notebook wouldn't work -- airliner tray table, kitchen counter, history class -- but they're lousy for real, sustained work -- and surveys are starting to prove it.

Because netbooks aren't considered an alternative by buyers, they're not the main factor applying price pressure on desktop PCs and full-size notebooks.

I think industry insiders and pundits are wrong. The sales and pricing declines we're seeing in desktop and notebook PCs would have happened anyway. Because netbooks are the only hot area of the PC market, OEMs should be counting their blessings.

This story, "Netbooks Aren't Such a Hot Ticket" was originally published by Computerworld.

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