April 14, 2009 4:00 AM PDT

All-in-one Nettops resurrecting desktop market

Note: This article has been corrected to reflect that the Dell Studio One 19 cannot be configured with an Atom processor.

Just a year ago, this category didn't exist. But after several Atom-powered all-in-one PCs debuted at CES in January, it's officially the hottest grouping of desktops on the market.

A category long dominated by Apple's $1,200 iMac is suddenly rife with nice-looking imitators that pack less power than traditional Windows desktops, but are also gentler on the wallet. They're a subcategory of desktop PCs called Nettops, and, like Netbooks, they're generally defined as a computing platform powered by the Atom processor that runs either Windows XP or a version of Linux. Combined with the all-in-one form factor and a smaller screen than most desktops (between 15 inches and 19 inches), they're essentially the Netbooks of the desktop category.

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"A year ago I would have said Netbooks are not going to cannibalize the notebook market. Then the economy went kablooey," said John Jacobs, director of notebook market research for DisplaySearch. Since then, many people who needed a notebook have chosen to spend $400 on a Netbook instead of the typical $800 on a full-size notebook.

"I think we'll see something like that for Nettops," he said. "Either for retirees or younger folks who don't need the portability of a notebook, and just need something to get on the Internet and do basic computing. Nettops, and all-in-ones will be very attractive devices, and we expect to see a lot of retailers who have stayed out of it will jump into it."

The all-in-one category as a whole is expected to grow to more than 6 million units in 2009, and to over 7 million in 2010, according to DisplaySearch. That's almost an 80 percent spike in shipments, which was unexpected at the end of 2008.

Reinvigorating a tired category
In fact, the rise of all-in-one Nettops looks to be the most interesting thing to happen to desktop PCs in years. And, just as the economy helped bolster Netbooks' appeal, so too will it make Nettops more attractive to buyers, industry watchers believe.

"Right now, nothing is going to stem the losses in terms of shipment decline that the desktop PC category is experiencing, especially with the (current) economy," said Richard Shim, a PC analyst with IDC. "But Nettops and lower-cost all-in-ones will help to maintain some of the market share for desktops. It's a bright spot in the market."

All-in-ones grabbed the attention of PC makers more than a year ago when Dell, Gateway, and HP suddenly debuted nice-looking desktops like the Dell XPS One and the Gateway One. HP's was even more impressive with its touch-screen interface--and accompanying high price tag.

Then Asus, riding the momentum of its Eee PC Netbook brand released the Eee Top, and MSI followed up its own Netbook success with the WindTop. And Dell dropped its pricier XPS One for the Studio One 19, which did not come with an Atom processor, but did have a lower price tag. All of these machines also have a touch screen or tablet-like stylus input.

According to DisplaySearch's calculations, all-in-one Nettops can feasibly be built for $399 at the cheapest. Add in retailer margin and the price goes up, but not by much. These generally cost between $450 and $800. For a desktop, that's an attractive deal if you just need a computer that's centrally located in the living room or office for the kids to do homework, or just to surf the Web and play movies and music at home. And for those who don't want Windows Vista and need something before Windows 7, Nettops are the only desktops you can buy with Windows XP today.

Perfect for discount retailers
There's not a lot of hard data to gauge how well all-in-one Nettops are doing so far since they've barely been on the market in the U.S. (The biggest all-in-one market in the world is Japan, and several Nettops have been available there since late last year.)

When all-in-one Nettops do become more widely available here, they should get a boost from non-traditional electronics retailers, in the same way Netbooks have. Nettops are almost designed for discount retailers like Target, Wal-Mart, and Costco to love: all-in-one box, no need to stock many accessories, and the price is low. Right now Target sells the EeeTop from Asus, and Wal-Mart.com has an Averatec Nettop.

But there also should be some shelf space available for all-in-one Nettops from big electronics retailers like Best Buy that generally don't bend over backward to sell niche, low-margin products.

"Because of the economy, retailers were bearish on Netbooks, and they've changed their tune now that there is a nice healthy accessory market for them," said Jacobs. "Now there's that niche (they) need to fill, certain (price categories), and you'd rather sell something for $400 than not anything at all. The same will be true of Nettops."

Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur. E-mail Erica.