Business Tech

SANTA CLARA, Calif.--The popularity of the Netbook caught Intel by surprise--more than once.

The initial demand for Netbooks caught Intel--and almost everyone--by surprise.

(Credit: Asus)

Shipments of this category of inexpensive, ultra-light, handy laptops--almost all powered by Intel's Atom processor--are set to hit at least 20 million units this year, about twice the number shipped in 2008, according to IDC. But if an analyst had suggested these numbers to Intel in March of 2008, executives would have dismissed the forecast out of hand--or laughed.

This failure, by many in the industry, to grasp the significance of the Netbook, forced Intel into perpetual catch-up mode at the beginning. "I'm the one who had to explain to our factory--I'm really, really sorry I miscalled the demand," said Noury Al-Khaledy, general manager of Nettop and Netbook Computing at Intel in an interview last week. "And the next month, I didn't quite get it right either," he said.

"I think we under-called how easily people would comprehend how useful the device was," he added. For the record, Asus launched the phenomenon with the Eee PC in late 2007, followed in 2008 by Hewlett-Packard, Acer, and Dell, among others.

Al-Khaledy continued. "I think there was sort of this pent-up desire for an affordable, portable, Internet-access light editing sort of device and many of our customers--with our help--nailed it. They helped us so much."

One of the distinct advantages that Intel Atom-based Netbooks have over other similar devices--such as those based on ARM processors--is Windows. ARM-based devices today don't run Windows XP or Vista--and won't run Windows 7. Intel-based Netbooks can run all of these operating systems and versions of Windows 7 may run as well, or better, than XP on Netbooks.

"People bash (Microsoft) all the time. But then what do you really want to buy?" Al-Khaledy asked. "People really do want Windows...the XP attach rate was really, really good." Though Al-Khaledy praised Asus' initial Eee PC and its Linux operating system, some consumers were disappointed when they found out that it wasn't Windows.

"The Linux thing wasn't clear to people. If you think you're getting Windows and then you get home and it isn't (that's a problem)," he said.

And what impact will Windows 7 have on the Netbook market? Pricing will be critical. Unless Windows 7 is priced aggressively, Al-Khaledy doesn't see it as a catalyst necessarily for a spike in Netbook sales. "I don't see it as a big tipping point. It's all about pricing. If you have to pay $30 more for Windows 7, it might make (consumers) pause. There's just not a lot of margin in the box," he said. "(But) if Microsoft prices Starter and Basic aggressively, why wouldn't you?"

Correction, 10:05 a.m. PDT April 8: This story misstated the type of support available after mainstream support ends next week. Under extended support, available for XP and business versions of Office 2003, users can sign up to get paid support or pay for help on a per-incident or hourly basis.

Microsoft will drop mainstream support for Office 2003 on April 14--the same day that the retirement process begins for Windows XP.

Although mainstream support for the Office 2003 applications suite will come to an end, Microsoft has the product scheduled to remain in "extended support" until April 8, 2014.

Under extended support, Microsoft only plans to deliver patches and bug fixes. Any other maintenance will be available only to users who have signed support contracts with Microsoft.

The Windows XP operating system has similar contractual terms. As with Office 2003, mainstream support will end for XP on April 14. Under extended support, available for XP and business versions of Office 2003, users can sign up to get paid support or pay for help on a per-incident or hourly basis.

Butler Group analyst Richard Edwards said Monday that discontinuation of support for the two products is not expected to cause disruption to business users.

"These changes in support have been known about for some time, so most users will have already got their plans in place," he told ZDNet UK.

As far as XP is concerned, users will have decided long ago that they are either going to wait for Windows 7, or make the move to Vista, Edwards said.

"Some may have decided that they are going to keep up with XP for longer if there is a particular piece of software they use that is vital to their business," he said.

Similar decisions would have to be taken over Office 2003, he added. "The decision is to either make the move to Office 2007, or wait for the next version of Office, and in the meantime pay Microsoft if you think you will need support," Edwards said.

Colin Barker of ZDNet UK reported from London.

When Apple converted to Intel in 2005 that was big. But 2008 Intel Atom converts make this look like a small-town baptism.

Overall, it was a good year for the Intel faithful despite the Wall Street financial crisis. Intel handily beat Advanced Micro Devices in the PC processor performance war. (Not coincidentally, AMD was forced to spin off its manufacturing operations to save itself.) But that really was last year's news since AMD had not been delivering competitive processors for almost two years.

iBook G3: Apple's conversion from IBM-Motorola to Intel pales against the conversion of PC makers to Intel's Atom

(Credit: CNET Networks)

The tectonic shift in 2008 came as one PC maker after another adopted Intel's new Atom processor. Count 'em: Acer, Asus, Dell, Hewlett-Packard, Lenovo, Toshiba--to mention only the largest vendors. (Atom shipments in the third quarter were strong and expected to hit between 10 and 20 million units this year.)

This wasn't one sole convert (like Apple), this was a Pentecostal conversion of biblical proportions. Almost overnight, the entire top tier of the PC industry got the Atom religion. In fact, it happened so quickly and so massively that companies like AMD and Qualcomm didn't know what hit them.

Wait a minute, Qualcomm seemed to say, we specialize in making chips for small devices, why is Intel running away with this market? (Even Intel was a bit surprised at the swiftness of Atom adoption in Netbooks.) And though AMD had helped pioneer the market by supplying its Geode processor for the progenitor of the Netbook, the One-Laptop-Per-Chip XO laptop, the Geode never came close to the commercial success (or performance) of the Atom.

AMD took notice, however, and said it plans to deliver a processor for the ultraportable market (an upscale Netbook or cheap notebook--however you want to look at it) at the Consumer Electronics Show.

And Nvidia followed suit. And seemed to be posing the same questions. Hey, if everyone's doing this, is this the Second Coming of the PC? Or, at least, a restructuring of the traditional price structure of the PC market? (The other question Nvidia is asking itself is whether it can bust the Intel bundling Juggernaut).

Oh, and we almost forgot Microsoft. Not initially enthusiastic about the Netbook market because of its XP-centric nature, Microsoft seems to have also gotten the Netbook religion with Windows 7 which will be ready for Netbooks from day one.