Business Tech

By not coughing up a low-cost MacBook, as some had expected, Apple has ceded a potentially huge market to PC makers. But is this just all part of Apple's marketing genius?

$999 is as low as Apple will go.

(Credit: Apple)

The announcement Tuesday of the $999 white polycarbonate MacBook was pretty ho-hum as product refreshes go (same price, same color as before) but the implication was important: Apple is surrendering a large, emerging laptop market to Microsoft and its coterie of PC makers.

Not that it's necessarily a bad strategy. Market researcher Gartner said recently that Apple's shipments in the U.S. grew year-over-year by 6.8 percent to total 1.57 million during the third quarter, putting it right behind Hewlett-Packard, Dell, and Acer. Comparatively, overall PC shipments in the U.S. grew by 3.5 percent from a year earlier.

But among those unimpressive overall PC numbers (HP's third-quarter shipments grew only 2.7 percent), was an impressive statistic for Acer: buoyed by Netbooks, Acer's shipments grew by 61.4 percent year-over-year, and it blew past Dell to become the No. 2 PC maker worldwide based on this growth.

Granted, Netbooks are a relatively low-profit segment (i.e., profit on a $400 Netbook is going to be a lot less than that on a $999 laptop). Nevertheless, they're a hot market. Intel CEO Paul Otellini has stated numerous times that Intel was able to create a market that grew faster than either the iPhone or Nintendo Wii. Case in point: Windows 7-based Acer Netbooks are now big on the Home Shopping Network--which claims to have sold more than 5,000 in one segment on Saturday.

And that's not the only market Apple is punting on. A new category of inexpensive, thin laptops has emerged with the roll-out of Windows 7 on Thursday. Like Netbooks, these laptops are light (typically 4 pounds) and don't include an optical drive. But they are relatively powerful and full featured. The 15.6-inch Acer Aspire Timeline, for example, with a 320GB hard disk drive and dual-core Intel processor is fairly well-endowed at only $500.

Apple is not receiving a lot kudos in the mainstream business press ... Read more

Dell, Acer, Intel, and others together are, in effect, creating a muddle of light laptop categories as part of a not-so-well-orchestrated marketing strategy, according to an analyst. This is expected to become particularly acute when a deluge of new Windows 7 laptops hit the market this week.

Acer 11.6-inch ultrathin looks like a Netbook but it's not.

(Credit: Acer)

Acer offered a graphic example of this recently when it introduced a small, inexpensive Windows 7 notebook--the Aspire Timeline AS1810T--that, from all outward appearances, looks like a Netbook. But it isn't--at least as defined by Intel. It's a new category of laptop called an ultrathin.

"There's a lot of confusion that Intel has created and they haven't really segmented the market that well," according to Bob O'Donnell, an IDC Research vice president.

And it gets more complicated. The inexpensive ultrathin is, in turn, competing now with the expensive luxury laptops, like the Dell Adamo, according to O'Donnell. "Ironically, what's actually happening we think is that the (ultrathin) is actually killing the high-end ultraportable," O'Donnell said.

Here's the problem: any given Windows 7 laptop with an 11.6- or 12-inch screen could be a Netbook, an ultrathin, or a high-end ultraportable, each with distinctly different price-performance characteristics not readily apparent to consumers.

"There's too many overlapping products," according to O'Donnell. Intel tried to prevent this from happening by declaring that any laptop with a screen larger than 10 inches diagonally is not a Netbook. That policy is fine in theory but does not carry over to the real world of head-butting competition among PC makers where even the subtlest production differentiation can mean a leg up on the competition.

Intel says look at performance and price. "Which offers the best performance overall? That's important," said Intel spokesman Bill Calder. "Pricing is a factor too. While some ultrathin laptops including 11.6 and higher are very affordable, none are in the $249 to $399 range that typically defines a Netbook," Calder said.

Some consumers might say it's not a big deal. But ... Read more

Intel's mainstay Netbook chip is finding a home in desktops, underscored by recent announcements from Hewlett-Packard and Acer.

HP MediaSmart LX195 uses a 1.6GHz Atom processor

(Credit: Hewlett-Packard)

On Wednesday, details emerged of HP's MediaSmart Server LX195, a home server packing a 1.6GHz Atom 230 processor that's priced at $400 with 1GB of memory and a 640GB hard disk drive. To date, HP has been using Intel Celeron and Advanced Micro Devices' Sempron processors. (Note: update adds Intel Celeron.)

Earlier this month, Acer rolled out the Acer AspireRevo, a small, slick box that augments the Atom with an Nvidia Ion chipset to boost graphics performance. This is expected to be priced well under $300 for some models.

Asus was one of the first to bring out a head-swiveling Atom-based desktop--the Eee Box, which has been updated recently with ATI graphics.

By design, Atom is a more power-frugal and, as a result, a slower processor than Intel's mainstream Core 2 chip architecture. HP, for example, markets its MediaSmart server as a storage hub, which typically doesn't require much processing punch. And Atom is cheap--the Atom 230 is $29, whereas comparative Celeron chips are about $34 but draw much more power. And mainstream Core 2 Duo desktop processors start at about $110.

Intel has long maintained that Atom has a place in so-called Nettops and, last year, brought out the dual-core Atom 330 specifically for this market.

This strategy was validated this week in Taipei, where motherboard maker ASRock was showing a desktop with a dual-core Atom 330 processor and an Nvidia Ion chipset. Asus is also expected to update the Eee Box line with a dual-core Atom processor.

Looking for signs that netbooks are catching on? And even morphing into notebooks? Here's a few.

Netbooks were the big end-user gadget on display at the Windows Hardware Engineering Conference that ended Friday.

And all the Netbooks at a Microsoft booth were running Windows 7, Microsoft's next-generation operating system due next year.

A Microsoft person on the floor said that a lite version of Windows 7 will run on 1GB of memory and 16GB of (solid-state drive) storage. Higher-end Netbooks will have a 160GB hard disk drive, according to Microsoft "guidance."

Microsoft displayed Netbooks running Windows 7 at WinHEC

(Credit: Brooke Crothers)

This person also said something surprising. Dual-core Atom processors will be used in Netbooks. I tried to disabuse him of the notion that netbooks would get dual-core Atom processors. No, I said, it was Nettops (Atom-based desktops) that would get dual-core. But he assured me that vendors were planning to bring out dual-core Netbooks.

So, I contacted Intel. There are no immediate plans for dual-core Atom chips designed specifically for Netbooks, according to Intel. But what's stopping a netbook supplier from using a dual-core Atom 330 (designed for nettops) in a Netbook? Answer: nothing.

At 8 watts, the chip has a higher power envelope than single-core Atom processors, but 8 watts is still low compared with a mainstream Core 2 Duo processor. Other specifications for the Atom 330 include a core clock speed of 1.6GHz, 1MB of level-2 cache, and support for DDR2 667MHz memory.

Beginning to sound more like a low-end notebook? I think so.

Netbook market share appears to be growing too. A little more than 5 million Atom processors shipped in the third quarter of 2008, according to Shane Rau of IDC, a market researcher. "Will it add to the total market or will it eat into the total market? Another question might be is Atom eating into another processor brand such as Celeron (Intel) or Sempron (AMD)?"

Rau says that the total market can grow while Netbooks eat into notebook market share. "The TAM (Total Available Market) can grow even as Atom eats into another brand. But we don't know how it's shaking out yet," he said.

And here's evidence of Netbooks penetrating the consumer consciousness. Best Buy now has a separate category for Netbooks on its Web site. Right under laptop computers you'll see "Netbooks". Interestingly, the Netbooks category is ranked above desktops and most other "computer" categories.

Other signs. Dell has a 12-inch laptop, the Inspiron Mini 12 based on the Atom processor. Is this a Netbook or notebook? You tell me.