Netbooks pose tough questions for Intel and its customers

The proliferation at Computex of ultra-small, inexpensive netbooks poses this pesky question: why are traditional ultra-compact laptops so expensive?

The Asus Eee PC 1000 debuted this week with a 10-inch screen, 40GB solid state drive, and Windows XP. Pricing has been rumored at between $600 and $700.

Features and size threaten to push the Eee PC 1000 netbook into a category traditionally referred to as subnotebooks--with one glaring difference: price.

Subnotebooks like the 11-inch Lenovo IdeaPad or Sony Vaio TZ series typically start at above $1,500 and go up from there, ranging up to $3,000.

HP mini-note and traditional ultra-portable notebooks: both ultra-compact designs, but big price gap

(Credit: HP)

But as netbooks inevitably add more features, analysts and industry insiders are beginning to wonder what will happen to the traditional laptop category. "(If) you add more (gigabytes) of storage and a bigger screen, I don't know what makes this any different than a normal laptop," said Avi Cohen, a managing partner at Avian Securities.

Cohen said the obvious downside is a slower Atom processor--compared with a mainstream Core 2 chip--but on the upside Atom has better battery life. "Arguably there's a category of consumers that don't need such high processing power. Or, at least, a different kind of processing power," Cohen said.

Maybe many more than computer makers realize. Industry sources familiar with Intel's netbook strategy also see a potential clash of categories eventually. "Of course, it's always been a concern, as (netbooks) gets more and more traction," said one source familiar with Intel's thinking on this topic.

And as netbooks add more features and creep up in price, Intel has to worry about the market confusion that may ensue. "Is a $700 laptop, even running Atom, a netbook?"--the source asked. That may be the question that laptop vendors and Intel will have to grapple with as the netbook category grows.

(An Intel company blog back in March described the netbook as a small laptop "designed for wireless communication and access to the Internet. And they cost about $250, making Netbooks a potentially disruptive and high volume market segment.")

Of course, subnotebooks like the HP 2510p, Lenovo IdeaPad, and Sony Vaio TZ offer more features than today's netbooks: faster processors, more memory, bigger hard disk drives, and usually larger screens than a netbook like the HP Mini-Note.

But two forces may be working against this purported advantage: One, all of these features may be overkill for a lot of consumers who use traditional, pricey subnotebooks for only email and simple Web browsing. And, two, netbook makers may continue to expand their offerings to push them closer to subnotebooks while keeping the price low.

This is something that Glenn Henry, CEO of Centaur, the Via Technologies subsidiary that designed the Isaiah processor, has said. "The one gigahertz (Isaiah) is plenty powerful enough to do lots of things," Henry said. Via is also targeting the low-cost netbook category--and has been for some time. Its C7 processor is currently used in the HP Mini-Note 2133.

"If this category continues like it is, at the end of the year you may have mega hard drive-based netbooks," said the source familiar with Intel's strategy. "Let's say someone comes out with a really nifty (design), it's got some extra features, a bigger screen, and a few extra bells and whistles. I don't think that's a netbook even if it's running an Atom processor."

What is it then? That's the $64,000 question.

[bemenaker]

These guys really need to look at the market better. The Intel blog post is what a netbook should be, a $300 minimalist pc. If anyone would actually delivery that, I could widely use them at my work, and totally revamp our workflow. As long as they keep creeping the price up over $500, I might as well be buying regular laptops, yet that kills most of my plans. I want some small lightweight machines that are easy to carry, to replace clipboards. More or less what the Tablet PC was supposed to accomplish, but without the weight. (Touch screen would be nice, but not necessary)

[bobcode]

Too much in the small package makes it expensive. They keep listening to columnists who want everything in their laptop, but cheap minimalist laptops is an untapped market, that'll close that fabled digital divide. Cut features and performance, and a conventional 12" laptop could hit that $300 or less price. Acer, with rebates, sells 15" laptops for $400, the price of an Eeee or XO in the US.

Drop the optical drive, removable media, and ports, it could be sealed and fanless. Apple dropped the optical drive like the floppy and boosted battery life, but they don't do cheap.

[kwhsy82]

Isn't the issue here fundamentally Vista and Office? My very low powered Nano has a perfectly capable browser and music system (though no flash). Conversely, I upgraded my desktop to 3 Gigs, dual core, etc., to get reasonable performance on Vista, Office.