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Netbook growth poisoning notebook revenues?

updated 05:10 pm EDT, Thu October 8, 2009

Netbooks forcing notebook revenue down

The rise of netbooks is having a corrosive effect on the financial health of the rest of the notebook business, a DisplaySearch study asserted on Thursday. The mini PCs represent 22.2 percent of all notebooks shipped but only account for 11.7 percent of revenue and are thought to ultimately be dragging revenue downwards for other categories as buyers skip more expensive systems they would have bought otherwise. Where netbook revenue has shot up from $845 million in spring 2008 to $3.07 billion in spring 2009, the rest of the notebook industry actually lost $3.74 billion of revenue in the same period, revealing that netbooks have actually cost the industry money.

The decline is blamed partly on a much more rapid decline in the average price of a netbook versus a full-size notebook. Notebooks themselves only saw their average selling prices drop 10 percent to $781, but the price of the much smaller systems fell a sharp 29 percent to just $361. As such, even the increased numbers of netbooks aren't enough to offset drops in the number of regular portables sold.

With the exceptions of Acer and ASUS, which thrive on netbook sales, PC and component makers have increasingly tried to steer sales away from the systems for the same reasons mentioned by DisplaySearch. Intel in particular has tried to push sales of systems based on its CULV (Consumer Ultra Low Voltage) processors, which are more profitable both for itself as well as for builders than the Atoms usually found in netbooks; the costlier parts can increase profit margins both through the base parts as well as by encouraging upgraded features in other areas.

Only a handful of firms have consciously avoided netbooks so far and are highlighted by Apple. It has regularly dismissed netbooks as being too slow and often of poor quality and instead has focused its attention on the high-end, $1,000 and up category where margins are more secure.





By Electronista Staff
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Comments

  1. cmoney

    Mac Enthusiast

    Joined: Sep 2000

    +2

    This also in:

    GLOBAL RECESSION. PEOPLE SPENDING LESS, BUYING CHEAPER THINGS. News at 11.

  1. Flying Meat

    Dedicated MacNNer

    Joined: Jan 2007

    +1

    Oooo. There's a shocker!

    Who knew this could happen?!!? I could never have foreseen buying cheap "stuff" could have a detrimental effect on the more expensive "stuff" market. Shocked, I tell ya!

  1. godrifle

    Fresh-Faced Recruit

    Joined: Jan 2006

    0

    Thank God...

    ...we have people creating studies that can explain these things. Reminds me of academia, where so many studies are commissioned to explain the obvious. Hey!

  1. Undo Redo

    Fresh-Faced Recruit

    Joined: Jan 2009

    -2

    overpriced to begin with

    The advent of netbooks shows me something; that portables have been overpriced all along. Asus and others wouldn't have started selling netbooks if they couldn't make money on them. So if this brings the prices down on regular notebooks, that's great! I wish Apple would follow suit.

  1. iphonerulez

    Fresh-Faced Recruit

    Joined: Nov 2008

    +4

    As I've been saying all along...

    Netbooks are basically going to undermine all of the computer industry until their prices start to go up. No way computer companies are going to survive selling netbooks long-term. It's going to hurt the traditional Windows PC companies sales more than it will hurt Apple notebook sales. This idea that every computer over $500 is overpriced is absolutely ridiculous.

    I don't know why cheapsters can't understand that there are levels that companies can't operate successfully below and expect to survive and still have quality equipment and service. And I know Apple will not follow suit. Surely they're not that stupid to try and get clientele that want everything for next to nothing. Netbooks are surely a poor business model. Not everyone is buying cheap in this recession. There's less expensive and then there's cheap junk.

    I think companies can build decent computers for $700, but $350 is suicide unless you've got some Chinese or Philippine workers working for pennies and your factory is just totally geared for netbook production. I wouldn't doubt the companies that are making money from netbooks are exploiting their employees and offering almost no customer support. I'm not even sure how they can foot R&D costs selling computers that cheaply.

    I guess if people are happy with them, then good for those people. I have no intention of ever buying one and that's my choice.

  1. testudo

    Forum Regular

    Joined: Aug 2001

    -1

    Re: As I've been...

    Netbooks are basically going to undermine all of the computer industry until their prices start to go up. ...This idea that every computer over $500 is overpriced is absolutely ridiculous.

    No, what is ridiculous is people who don't realize that, perhaps, there is a large market for netbooks because they do what so many people need them to do. Not everyone is cutting video or synthesizing music. Most people are looking for something to check email, surf the web, maybe store their digital photos, write a few letters (do people write letters anymore?), various garbage stuff.

    For these types of needs, why should one spend $1000+ on a 'full-featured' laptop, if a netbook suits their needs?

    I don't know why cheapsters can't understand that there are levels that companies can't operate successfully below and expect to survive and still have quality equipment and service.

    Who are the cheapsters? The people buying the computers? Why should they care whether the company is making money? Do you sit around going "Well, I'm not going to buy that DVD player because it costs too little. The manufacturer can't be making money on it."?

    And I know Apple will not follow suit. Surely they're not that stupid to try and get clientele that want everything for next to nothing.

    Of course they're not going to do it. Because it isn't their market. And because it would cannibalize their higher-end sales. This is the same reason Apple won't release a mid-size tower. Not because it won't sell. It'll sell too well, cutting into the sales of the high-margin Mac Pro which is more than what most people need.

    Netbooks are surely a poor business model. Not everyone is buying cheap in this recession. There's less expensive and then there's cheap junk.

    If you're making money, how is it a poor business model? Just because you're not making 30% margins.

  1. Undo Redo

    Fresh-Faced Recruit

    Joined: Jan 2009

    -1

    big corporate

    Exactly. Why defend big corporations which are making big profits; unless you're a stockholder or one of their chief executives and are loading your pockets?

    I understand the need for quality but that doesn't mean there's a need to charge outrageous prices to provide a decent computer. And (some) netbooks have proven that. Thankfully, there are a lot of more affordable laptops out there now as a result.

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