Archive for the ‘Economy’ tag
Call this.. the netbook effect.
These are certainly interesting if not challenging times that we live in. With the economy in a recession and folks looking to stretch their dollar every which way possible, it makes complete sense for consumers who are looking to buy a new computer to take a serious look at netbook systems. After all, a netbook provides nearly all the functionality that a desktop or notebook PC offers but in a much smaller and cheaper package. Of course, netbooks have their limitations when compared to their bigger brothers. They’re not anywhere near as fast as; they have far weaker graphics; and their small form factors can be a detriment at times – especially in the user interaction space with smaller displays and keyboards. Yet even with the downsides, netbooks are gaining popularity simply because most users need a PC for the most basic of things - checking email, surfing the web, listening to music, work on a document, etc etc. Thus, all of this easily explains why netbooks are flying off the shelves at a rapid pace…
Yet have any of us considered the downward effects of the popularity of netbooks? This is exactly what BusinessWeek talks about in their article entitled “Invasion of the Netbooks”. It’s clear – netbook sales are displacing standard PC or notebook sales. According to ASUS, some 10 to 20% of netbook buyers would have purchased a more expensive computer “if netbooks weren’t available”. Acer thinks that the number is closer to 8 to 10%. With IDC figuring in that roughly 11 million netbooks will be sold this year, that’s roughly 1 million expensive computers not being purchased in favor of netbooks.
No problem you say? Companies are still making money simply because we’re still buying netbooks? Not so fast. Remember that netbooks are cheap. They have lower profit margins (if any at all) which affect not just the hardware manufactures, but also the component manufacturers and of course the bundled software application vendors.
On the hardware front, netbook sales are driving up the sales of Intel Atom processors. While it’s certainly great for the Atom business group, this isn’t necessarily a good thing for Intel as a whole since their dollar margins are now shrinking due to the lower costs of the Atom processor (though percentage margins are probably similar).
Thinking this through, other hardware vendors are affected as well. Popularity of 10 inch displays are displacing larger displays which means display manufacturers are making less money overall. Continue that trend to the software side. Microsoft makes less with the Windows XP Home OS bundle than with other versions of their OS.
Thus the only way for companies to make up the differences will be in volume – sell many more netbook systems to make up for the dollar revenue loss of not selling higher end systems.
The ironic thing – the sagging sales of higher end equipment will result in lowered/missed earnings for companies which at the end of the day will not help jobs nor the economy. AND yes.. it’s the economy that ultimately makes many of us consider netbooks to begin with!
Yes, I do acknowledge that this is a simplistic way of looking at things.. but the netbook threat is indeed very real when it comes to the overall PC economy and whether we like it or not, this has an effect of the bottom lines of many tech companies as well as retailers at the end of the day.
