Intel: Netbooks Continue to Cannibalize Notebook Sales

by Sam Dean - May. 27, 2009Comments (8)

As GigaOm reports today, Intel believes that the rate of cannabilization of notebooks by lower priced netbooks is sitting at around 20 percent. That's what the company's European sales chief told Reuters at a company event. This trend remains very positive for open source in general, including but definitely not limited to Linux. It's also an issue that is likely becoming a growing sticking point for Microsoft.

According to Reuters:

 

"Christian Morales said netbook sales were about 16 percent of all notebook sales globally, and a little higher in western Europe. In Britain and Italy they may account for as much as a quarter of all notebook sales, he said on Wednesday."

 

Intel makes the Atom processors that are so prevalent on netbooks, and we've reported before on the fact that Microsoft has attributed some of its recent revenue shortfalls to the success of netbooks. In a recent 10-Q filing that came just before the software giant laid off 5,000 employees, there was this quote:

 

"The decline in OEM revenue reflects an 11 percentage point decrease in the OEM premium mix to 64%, primarily driven by growth of licenses related to sales of netbook PCs, as well as changes in the geographic and product mixes."

Part of the problem netbooks are creating for Microsoft is that they are low-cost, low-margin substitutes for laptops. Another problem is that Linux continues to have a foothold in the netbook space. In a post called "Microsoft and the great netbook price-fixing scam of 2009," InfoWorld's Randall Kennedy even suggests that Microsoft may be colluding with netbook makers to limit customer choice and give the upcoming Windows 7 OS dominance on netbooks.

The fact that Linux is maintaining a presence on netbooks is good news, and we've delivered our prescription for how it can get increased presence. Even Windows-based netbooks are good news for open source, though. Firefox is pre-loaded on the millions of Windows netbooks that Asus is shipping, and many netbooks come pre-loaded with numerous other open source applications. That means that any more people are gaining experience with good open source applications as soon as they unbox their new computers--undoubtedly a positive trend.


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8 Comments
 

Microsoft's stronghold in Office productivity apps would also be eroded by this trend because Netbook buyers are typically more price sensitive (who wants to spend $399 on MS Office when their Netbook costs $299) and will also serve as a vehicle to bring more visibility to FOSS productivity apps like Open Office that Netbook OEMs are increasingly bundling into their products.


Its just one MORE of those disruptive trends that will help FOSS turn the corner.


0 Votes

Want a prescription for pushing Linux out via netbooks?


One of the manufacturers needs to cross a MacBook Air with a current Netbook. Bigger screen, bigger keyboard, no CD drive, one or two USB, cheap battery. Say a 12-13" screen, and lightweight.


Place a price point above the current netbooks, but running a flavor of linux with typical FOSS productivity apps preinstalled, and below the price point of current Vista laptops.


Now that would put price pressure on MS and the big laptop makers.


0 Votes

@Dustin - your idea is good in theory but the sub-$400 price-point is the fundamental reason Netbooks are gaining traction. While the "Netbook Air" would be nice, it wouldn't fall into either category - notebook/netbook and would be a tough sell today. Unless, ofcourse, Apple decides to launch it at Mac World! ;-)


0 Votes

It is interesting that companies are creating dedicated devices for specific needs - ala Amazon Kindle 2.0, rather than 'all-in-one' devices like netbooks. While notebooks will continue to be present, specific devices should continue to proliferate.


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I agree with @Jack. This is the 'growing entropy' concept - more specialized machines as technology improves. Let us not forget that the iPod created an entirely new category for portable mp3 hdd-based players. If the netbook manufactures can keep up with this disruptive technology, they will survive. Otherwise, remember the ZX Spectrum?


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How long before netbooks become the OLPC machine of choice? You can get a new one very cheap now, it seems, and it is a full-fledged machine!


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Sounds like its the end of the "one-size-fits-all" model that hardware manufacturers have enjoyed for the last 2 decades... With hardware, components and manufacturing costs shrinking, the threshold for the creating a new category of devices has been lowered substantially just as it did with the internet once bandwidth and storage costs plummeted. In 1998, one couldn't have imagined a full-fledged social network for dogs, but its thriving in the current cost structure. Similarly - there will be different devices for different audiences with similar computing power and only interface and peripheral changes to customize them for the target audience...


0 Votes

Let me ask the obvious question here;


Is the monopoly abuse (ie. "great netbook price-fixing scam of 2009") demonstrated by Microsoft's lowering the cost of Windows to something well under $15, or was it rather keeping the price jacked so much higher, until Linux netbooks finally forced a genuinely competitive price?


0 Votes
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