April 28, 2009 4:00 AM PDT

Adieu to the old-fashioned desktop computer?

Some giants of the PC industry are just beginning to sell tiny and cheap Netbooks and all-in-one desktops, which have the monitor and processor in the same box.

Tae-Hyun "Tiger" Cho

(Credit: Averatec)

But little-known Averatec, based in Orange County, Calif., but part of Korean parent company Tri Gem, has been at it for several years. So you'll have to pardon Averatec CEO Tae-Hyun "Tiger" Cho if he believes he has a few insights to share regarding this small but growing market.

Averatec's first all-in-one desktop was introduced in 2004. But the company's main business before jumping into Netbooks last year was making 12-inch ultraportable notebooks--when most were churning out 14- and 15-inch portables--and it was making them cheaply when the competition was charging hundreds more.

Now Averatec is charging ahead with the majority of its production in just two of what happen to be the fastest-growing areas of PCs: all-in-one desktops and tiny, low-power Netbooks.

Netbooks are forecast to comprise one-fifth of the 133 million notebooks to be shipped in 2009, and the more than 3.5 million all-in-one desktops shipped in 2008 is expected to double by 2010, according to market research firm DisplaySearch. While all-in-ones are still a small part of the desktop market, it's one of the only desktop form factors that's actually growing.

The next Averatec Netbook model, due to arrive in August or September (pictured below) has been developed "from scratch" in-house at Averatec, Cho said. Besides increased attention paid to design, there's something on the inside of the forthcoming Netbook that will be markedly different from most of the field.

Averatec's upcoming 10-inch Netbooks with mystery operating system.

(Credit: Averatec)

"The OS is going to be a surprise," Cho said. While he would not confirm or deny that the OS will be Android, the company will say that it will be "a merger of cell phone and PC technology."

Averatec won't be the first if it is indeed Android. Chinese PC maker Skytone announced over the weekend that it would offer a $250 Android-based Netbook, and there have been rumors of MSI doing the same. HP, Asus, and others have also said they are "experimenting" with Android on their Netbook models.

Averatec is positioning itself to take advantage of thrifty consumers and people who would welcome less intimidating approaches to technology. Cho believes all-in-ones and Netbooks are the answer.

Speaking in a mellow Australian accent, Cho calls himself a big believer in all-in-one desktops. In an interview with Crave, he said their "plug and play" capability is attractive to consumers. That is, they come in one box--no hunting the aisles for a tower and a monitor--and they have a bigger screen than most notebooks. In fact, Cho says he sees a day in the near future when traditional desktop systems will disappear from the home entirely.

"I believe that the all-in-one category is going to eclipse the (traditional) desktop category," he said, though he isn't claiming to know exactly when that will be. "But the desktop category will be split between home servers and all-in-ones, and the day we buy a tower and a screen will go away."

Averatec currently has a 22-inch standard all-in-one desktop, and another coming next month with an AMD 3250 dual-core CPU and Vista Premium, which entitles the owner to an automatic update to Windows 7 when it does finally arrive. It's just $599. That's only $100 more than the company's other 18-inch all-in-one, which falls under the category of Nettop--a desktop outfitted with Intel's Atom processor, a cheaper, lower-power CPU.

By offering cheap, self-contained PCs, Cho thinks his company is ahead of the curve. Of course, it's not the only company making them: MSI, Asus, and Shuttle each also make all-in-one desktops for between $500 and $600. All of them hope to steal market share from giants like Hewlett-Packard, Sony, and Apple, which often charge more than $1,000 for their versions of the all-in-one PC.

An 18-inch Atom-powered all-in-one desktop.

(Credit: Averatec)

Cho is adamant that most consumers generally don't want to pay that much for a desktop--even the ones with a touch screen. Now, with the economy the way it is, timing couldn't be better for a budget version of those expensive all-in-ones. At that price, "HP has done a great job, but the volume, I think, is not really there," he said.

The arrival of cheaper touch-screen Atom-powered all-in-ones--or Nettops--is well-timed, he said.

"A year ago if we tried to do this, (we) wouldn't have been able to because there would have too much explanation as to what a Nettop is. But this market here understands that Netbook is a very good value proposition."

Averatec wasn't first to market with a Netbook. And when it did get there, the company's offering, the Averatec Buddy, which debuted for $449, was essentially a rebranded MSI Wind. But Cho, whose company has been in the business of selling smaller, budget-price laptops for several years, says the trend toward Netbooks has been helpful.

"The Netbook has done our business a very big favor. It's taken focus on 15.4- and 14-inch (notebooks) and focused on more light and thin form factors."

And while Averatec is venturing into 10-inch Netbooks, Cho doesn't plan on going much smaller than that because that's when Netbooks will begin to clash with smartphones, which can be a confusing value proposition for consumers, he said.

Instead, he said, he's happy to stick with 10-inch Netbooks, 12-inch laptops, and all-in-one PCs.

"As today's niches become tomorrow's mass markets, we hope to grow with that."

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.