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?"
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A little more than a year after the launch of the MacBook Air, a new luxury laptop has arrived from Dell. This calls for another look at the notebook versus Netbook argument, the computer equivalent of bourgeoisie versus proletariat. In this case, Air versus Aspire; Adamo versus Eee.
Lightweight luxury laptops have been around for a while (think Sony Vaio and Toshiba Portege ultraportables), but the age of head-turning, ultrathin designs dawned with the 13-inch light-and-wide MacBook Air, the HP Voodoo Envy 133, and the ThinkPad X300.
Dell Adamo luxury laptop joins the MacBook Air in the conspicuous consumption computing category
(Credit: Dell)Now the Dell Adamo joins the stable of conspicuously consumed luxury laptops. The Adamo soars along with Apple's Air in the rarefied pricing altitudes of $1,799 to $2,699.
At the other extreme are Asus and Acer, down-to-earth working-class designs which offer portability for a lot less. Though both companies offer expensive laptops too, they have gained prominence with their inexpensive Netbooks: the Eee PC and Aspire One, respectively. These typically fall into the sub-$500 range.
Dell's entry into the luxury laptop market was replete with all the trappings of a high-end product rollout, including a lavish, overdone Adamo Web site (as in, I couldn't click on "skip intro" fast enough) of beautiful people clutching computers. (And viewing the site, this question comes to mind: Is the Adamo meant more as a Dell showcase item--like a piece of finery set in a vitrine, to be admired but not purchased?)
Juxtapose this with what's happening in the Netbook space: inconspicuous but slow-but-steady creep into a higher-performance bracket. This trend is being driven by better Intel graphics (the GN40 is now capable of 720p HD video), with some Netbook designers entertaining the idea of adding even higher-performance Nvidia graphics. Reports also claim the Atom processor will be ratcheted up to 2.0GHz.
Will one design philosophy eventually prevail? Gravitating to a sweet-spot somewhere in the middle?
Let's do a little comparison shopping.
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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.
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