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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.

UPDATE: With headlines this week like "AMD jumps into the netbook game," it sounded very much like Advanced Micro Devices was making a belated entry into the netbook segment. But this isn't the case, according to AMD.

AMD chips are already used in a number of existing netbook-like designs like the 10-inch Red Fox Wizbook (above) and OLPC XO laptop.

(Credit: Red Fox)

An AMD spokesperson said that this photo of a purported AMD netbook is, in fact, just a small notebook from Raon Digital--not an AMD reference design.

"It is a Raon Digital product and will start production at the end of July," AMD spokesperson Phil Hughes said in response to an email query. "They have two models. One is TL-56 (Turion processor)-based and the other is Sempron 3700-based."

And Hughes said there are already a raft of netbook-like products in the market using AMD chips including the progenitor of this category of small, low-cost laptops, the One Laptop Per Child XO (OLPC) laptop (which uses the AMD Geode LX-700).

Other products include Red Fox Wizbook (which uses the LX-800), and Kohjinsha E8 (which also uses the LX-800).

So it isn't a question of AMD entering this market or not. It's already there. "Our journey with OLPC started three years ago," said AMD vice president Pat Moorhead. "We are in this market. But what we are (also) saying is that because we've learned a lot in this market, we see a much better opportunity in that 8 to 12 inch notebook space. As opposed to passing something off as a PC that is very un-PC like," Moorhead said.

Moorhead has listed pluses and minuses (mostly minuses) about the Asus Eee PC 8G netbook in his blog. He believes it is critical that netbook suppliers be clear about what the netbook lacks.

"Be very clear what (a netbook) can't do. With SSD flash versions it's not going to be able to sufficiently hold your audio collection. It prompted me to load (Windows) XP SP3 (service pack 3) and I only have a 167 megabytes remaining," he grumbled.

(Pat Moorhead's blog here.)

And AMD sees similar compromises that may disappoint users in the mobile Internet device (MID) category, too. But it's not that AMD is not a player. The company has shipped over 250 million Imageon processors to mobile handset suppliers that offer a wide range of devices including MID-like smartphones, according to Moorhead. "We licensed our intellectual property to Qualcomm, Nokia, STMicro, and Freescale. So we know that market pretty well," Moorhead said.

Intel, on the other hand, is pushing its Atom processor hard and finding a lot of interest in netbooks from companies like Acer, Dell, MSI, and a host of smaller companies.

Intel expects the market for low-cost computers to increase to 100 million units per year by 2011, according to Bloomberg, compared to the total worldwide notebook market that will hit 194 million units a year over the same period.

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.

Hewlett-Packard (HP) chose a relatively obscure processor from Via Technologies for its high-profile Mini-Note 2133. An HP marketing manager explains why.

The HP 2133 Mini-Note PC starts at $499 and weighs only 2.7 pounds

(Credit: Hewlett-Packard)

The Via C7-M offered what HP needed now, according to Robert Baker, a notebook product marketing manager for HP. "Via gave us that right mix of performance and price for the type of environment that this product is going into--content consumption." And the chip's low power requirements were a plus too. "Their power (efficiency) is where we needed it to be for this platform. Web surfing, creating Power Points," Baker said.

CNET Reviews said the 2133 Mini-Note performed at "an acceptable level" when "surfing the Web and working on office documents" but "doing very much more than that, or open too many windows at once, and things will start to bog down." And CNET Reviews added this: "We won't kid you--this CPU (1.6GHz Via C7-M) did not perform well at all on our standard benchmarking tests."

Via C7-M processor

(Credit: Via Technologies)

Timing also factored into HP's decision to go with Via's C7-M. Intel's low-cost Atom processor--which will compete directly with Via chips--is not shipping yet from Intel. Though Baker did not cite the Atom explicitly, he alluded to timing exigencies. "The other key thing was we were designing for education. We had to bring the product to the market now. A slip of a month kills you," he said. Educators need to get their hands on units "so they can make decisions for purchases they'll roll out during the summer when they're doing the vast majority of their purchases."

HP will, however, consider other processors such as the Atom when it's time to refresh the lineup. "There will be an interim refresh about six months in. If the Atom is the right processor, that's what we'll go with. We'll look at everything in the market at that time," he said. Via is slated to bring out a higher-performance "Isaiah" processor in the June time frame. HP will also look at that, he said.

The design for the 2133 was not driven by the wow factor, which is an Apple forte. "We didn't say, hey, we want something cool." The design was a result of a long process of "taking feedback from our customers. All those conversations were well over a year ago. This has been in development for a year now."

Whether ultra-compact, low-cost notebooks like the 2133 (starting at $499) and the Eee PC constitute a sea change in notebook buying habits nobody can say yet. To date, small, fully-functional notebook PCs--which the 2133 is intended to be--have carried a high premium. Look no further than the MacBook Air, said Baker. The Air starts at about $1,700 and jumps to above $3,000 with a solid state drive (SSD). The svelte, 2.8-pound HP 2510p subnotebook for corporate customers starts at about $1,500.

If this class of notebooks does take off, "you'll see more and more bang for your buck baked into these small machines," Baker said.