The Digital Home

Can a product's value be measured by how much its developers improve it over time? If so, that metric would not have positive implications for the Apple TV.

Apple quietly updated its Time Capsule storage device Thursday. The high-end model will now retail for $499 and allow up to 2TB of storage. The low-end model with 1TB of storage will now retail for $299.

The Apple TV is in desperate need of an update.

(Credit: CNET Networks)

It's a nice upgrade. And it follows a list of several updates Apple has made in recent months to many of its products, including the iPhone, MacBook, and MacBook Pro. Apple is even preparing for its new operating system, Snow Leopard, which is slated for release in September.

But the company has yet to release a major upgrade to its Apple TV. Granted, Apple has updated the device's software on multiple occasions, but where's the new, major hardware update?

For almost a year now, we've been hearing about impending refreshes to the Apple TV.

In September, reports suggested that an Apple TV update featuring anything from a "Mac Mini/Apple TV" hybrid to something related to HDTVs was imminent. Nothing of the sort was ever announced.

In February, reporters found a survey that Apple conducted asking Apple TV owners how they were watching video on the device. It also asked them what they would change about the set-top box. That survey vanished from Apple's Web site. And once again, no major updates were released.

The Netbook is looking more like a notebook nowadays.

(Credit: CBS Interactive)

According to a study released on Tuesday by market research firm NPD Group, Netbooks are confusing customers. Sixty percent of the nearly 600 adults surveyed said they bought a Netbook instead of a notebook because they thought they had the same functionality. Had they known that they didn't, many of those respondents would have purchased a notebook instead.

"We need to make sure consumers are buying a PC intended for what they plan to do with it," said Stephen Baker, vice president of industry analysis at NPD. "Retailers and manufacturers can't put too much emphasis on PC-like capabilities and general features that could convince consumers that a Netbook is a replacement for a notebook. Instead, they should be marketing mobility, portability, and the need for a companion PC to ensure consumers know what they are buying and are more satisfied with their purchases."

Baker makes a fine point. Netbooks aren't notebooks. They're not nearly as powerful as their larger counterparts, they're cheaper, and they're typically more suitable for those who want to go mobile. But that line between Netbooks and notebooks is quickly blurring. And it's starting to backfire.

From bad to worse

(Credit: CNET Networks)

A new study out from DisplaySearch detailing how well (or poorly) notebook manufacturers performed over the past quarter has hit the Net and the results don't look too promising for Dell.

According to the study, the global notebook market grew by about 24 percent quarter over quarter and a whopping 42 percent year over year. Amazingly, 29 million notebook units were sold in the last quarter alone and HP--the de facto leader in computing right now--commands 21.4 percent of that total, representing 72 percent growth over the same period last year.

But perhaps most startling, Dell has not only lost ground to HP in the notebook market (its share of the market fell 0.2 percent to 13.8 percent), but Acer is hot on Dell's heels and commands 12.8 percent of the total notebook market.

It gets worse: if we were to combine the total share of all Acer properties--Acer, Packard Bell and Gateway--the company's new market share is a whopping 16.2 percent, which not only puts it into second place in the worldwide notebook market, it leaves Dell far behind the pack.

Who could have thought just a few short years ago that Dell would be in such a position? Not only is the company slipping further behind, Acer--a company that had heretofore been an also-ran--has developed into a powerhouse in this industry.

But is there anything Dell can do to turn its business around? Unfortunately, the solution may not be immediately available, and it may need to change its historically successful market strategy in order to do it. If it doesn't, look for Dell to become the industry's also-ran.

HP Pavilion dv2600

(Credit: HP)

With HP's decision to release a slew of new laptops that offer a slick design and nice specs, it had me thinking: is this the new face of the notebook market? Are notebooks becoming commodities that can be differentiated only by design?

And if all of that is true, what will happen to brand loyalty? Is it another victim of this vicious battle?

I think it is.

As a person who owns a custom-built desktop, Mac Mini and a few laptops, I once found it hard to believe that anyone would actually believe that the death of the desktop computer would be coming around the corner. I've heard the argument set forth in other arenas and scoffed at the possibility of such a popular product being thrown away in favor or a more versatile machine. I was wrong.

The desktop is a dying breed -- it's as simple as that. I had this epiphany recently when I had to run down to my local CompUSA store. Upon perusing the available notebooks, it dawned on me: "where are all of the desktops?" After some searching, I found them tucked away in a few aisles with very little fanfare and (more importantly) very little sales representative interaction. You can always tell when a product doesn't sell well or it's on the way out in these stores -- the sales reps will make believe you don't even exist while you're looking at it. But once you walk over to the notebook display, they start taking bids on who should get to you first.

But that's not the only reason I think desktops will be meeting an untimely demise in the next five to ten years. First and foremost, desktops are a dime a dozen these days. Years ago, it made sense to have a desktop -- notebooks couldn't stand up to its power and the lack of WiFi meant notebooks were just as useless as desktops when you left the house.

Today, with the flood of WiFi wherever you go and this country's constant push for mobility, desktops are being left at home running idly just wishing for someone to play with it.

Take the whole design issue with desktops. If we've learned anything, we now know that design matters to the consumer. The days of ugly beige designs have given way to snazzy laptops that offer equal (if not better) performance than the ugly desktop sitting at home. Computers have become a fashion statement. If you still own a homely old Dell computer, does anyone ask you about it? I doubt it. But if you walk into a room with a custom-designed machine or a Mac, chances are, the people in the room will take notice. Simply put, desktops are just too ugly. If you can find me a good looking desktop PC that will actually appeal to enough customers to make them buy it, I'll show you ten more better looking notebooks that people would rather buy. It's nothing personal; desktops are just old and unattractive.

For the first time in the history of computing, notebook computers outsold desktop PCs in the summer of 2005. That didn't happen because companies made some errors in shipments or notebooks just got lucky. That happened because people (and more importantly, businesses) realized that notebooks have become more practical.

And let's not lose sight of businesses in this entire argument. As more businesses bring notebooks into the work force, employees will begin using them and realize that notebooks have finally become powerful enough to replace that dusty old desktop at home. Businesses play a major role in the world of consumer computing. In the late nineties, Dell understood that if it sold its computers to businesses, employees would use and buy them for the home because they were comfortable with them. It still works today, but this time, it's not necessarily company-specific. This time around, people just want to use the same machine everywhere. Period.

And if you don't believe me, consider this: Between the same periods of 2005 and 2006, the aggregate drop in consumer desktop purchases across all companies was a staggering 10.2 percent.

Dell, HP and Apple are three of the biggest computing vendors in the world. With a combined market share that can not be rivaled, these companies should be the first to say that desktop sales have a place in the future of computing. So far, each of those companies hasn't echoed that sentiment for one simple reason: desktop sales are plummeting.

According to the 2006 HP Annual Report, the company's weighted average net revenue growth attributed to desktops was just 0.8 percent. Amazingly, notebooks made up 8.4 percent of the stated net revenue, compared to 1.5 and 5.4 percent from just last year. Besides that, the company's revenue from notebooks and desktops is a sign of bad things to come for desktops. According to the report, desktops still brought in more revenue for HP, but its gain over last year was just over $200 million compared to the notebook's division gain of over $2 billion.

But it doesn't end there. Dell has also faced similar desktop woes. In 2004, desktops represented 45 percent of the companies revenue. In 2006 (the company's last Annual Report filing), desktops accounted for just 38 percent of the entire revenue while notebooks represented 25 percent. It's not equal to desktops yet, but rest assured, notebooks will be taking over in the next few years as Dell's desktop sales will continue to plummet.

Lastly, your friends over in Cupertino have also felt the effects of sluggish desktop sales. According to Apple's latest quarterly report, notebook sales almost doubled desktop sales in the same quarter.

The proof, as they say, is in the pudding. Whether you're a fan of desktops or not, the devices that have almost single-handedly made computing what it is today are on the way out. The desktop business has become a commodity with the same components making up the same (ugly) designs offering the same cost to consumers yielding the same small margins and very little net income for companies. And while it may sound awfully glum for the average consumer, there's no end in sight. Short of building your own desktop, the machine you buy today will be the same machine you buy a few years from now with a few updated components.

I don't make this argument in a vacuum. I know that the best desktop can still run circles around the best notebook and I understand that the components you can currently throw into a desktop can be superior to those in a notebook, but you can't possibly believe this will last forever. At one time, people actually believed that there was nothing else left to invent. They were wrong. Today, some people believe that desktops will always hold an advantage over notebooks because that's always been true in the past. They are wrong.

If you take a look back at the last five years in computing, I think you would be hard-pressed to claim that notebooks haven't made much bigger strides in advancement than desktops. The notebook has successfully solidified itself as a comparable alternative to desktops in this performance war and I simply don't believe there's any chance desktops will be able to maintain the lead -- it's just not profitable enough for companies to do so.

Perhaps the easiest way to understand where I'm coming from is to take a look at the competitive environment in computing. Years ago, companies were cropping up from all over the world offering something unique in desktops. Years ago, small companies could actually make a splash in this business. Today, it's practically impossible. With the size of Dell, HP and others, there is little opportunity for a small PC manufacturer to develop into a major player in this business. Dell buys components that cost a fraction of the price Jane Doe's Computer Company can buy them for, so Jane is forced to charge a higher price. And if a consumer can have the same exact machine (because most desktops basically are the same) at a fraction of the price from a reputable source, guess which option they'll choose. It's a no-brainer: the death of innovation in desktop computing has officially ushered in its demise. It's as simple as that.

There's no exact timeline to trace the official death of desktop computers, but if I had to guess, I think you'll find it hard to use desktops in about five years. In ten years, desktops will be a thing of the past.

Every Thursday, Don picks a current-events topic and discusses how it will impact us in the future. Check out more from Don's Future Implications series.