Netbook Plague Kills 1 in 5 Notebooks

The netbook scourge continues unabated, and PC manufacturers are host on their on petard. Could anything be more putrid? DisplaySearch has ruined the last official day of summer holiday by releasing netbook shipment data. In May, I blogged that netbook US retail share approached 20 percent.

Fire all the short-sighted product managers! The netbook scourge advances on the mainstream computing market, cannibalizing all margins in its path. Netbooks—or in DisplaySearch parlance “mini-notes”—accounted for 22.2 percent of worldwide portable shipments in the second quarter. That’s just the bad. The worse: Netbook shipments grew 40 percent year over year, or nearly twice notebooks.

Those fraking, margin-sucking minis are everywhere. Less than a year ago, analysts beat their chests and asserted that netbooks would account for no more than 10 percent of the PC market. Well, hell, netbooks are one-in-five portables already. Someone needs to review their spreadsheets. Pilot the pivot tables, arrr, Mattie!

I detest netbooks. They’re pure evil. I’ve been waving “Beware, the End of the World” signs for more than a year. But no one is listening, although Microsoft is slowly wising up. Crack the netbook case and inspect the motherboard. Surely 666—the sign of the beast—is etched somewhere.

I would never buy a netebook. “But look, Dad, they’re s-o-o cute!” Yeah, cute as a little devil. Netbooks are underpowered, overvalued and cannibalistic. Every netbook sold sucks sales from higher-margin and, granted, larger portables.


In one of my last posts as Microsoft Watch editor, I asserted: “Netbooks are a Menace.” In a supporting eWEEK news story: “Netbooks Are Destroying the Laptop Market and Microsoft Needs to Act Now.” Both posts use NPD sales data to show how rising netbook sales have sapped average selling prices and portable margins with them. According to NPD, at US retail in June, the Windows notebook ASP was $520 with netbooks but $569 without them.

Cute and cheap comes at the right time, when the econolypse has sucked money from consumer wallets and all common sense from PC OEM product managers. For Acer and Asus, netbooks are miraculous inventions, driving up their PC shipments and marketshare against giants like Dell and HP.

For most other OEMs, netbooks raise PC shipments at the expense of profits. “Yeah, we had a great quarter, Wall Street. Our shipments are up 50 percent, but margins are down 35 percent. All because of netbooks. God Bless America and our ODMs!”

I’m not one to raise the sympathy call for Microsoft, but someone must. Netbooks are sucking air out of the room—bursting Windows! Microsoft’s Client division had a couple rough quarters in a row, with netbooks as much to blame, if not more, as recession-sapped PC sales. During second calendar quarter, when Windows Client revenue fell 29 percent year over year and income declined 33 percent, netbooks made up 11 percent of PC sales. Microsoft also popped less profit per desktop operating system license, because of Windows XP netbooks. Ha! And Microsoft executives worry about piracy. Perhaps the software they sell is worse problem.

Microsoft’s Windows 7 Starter Edition strategy is non-starter, I say. But last month, Microsoft CEO Steve Ballmer offered a shard of hope that Microsoft would pursue an aggressive OS upsell strategy and push the PC market to higher-cost, higher-margin thin-and-light portables over netbooks.

In your dreams, Stevie! Your OEM partners are enemies to you and to themselves. Netbooks are a narcotic they can’t get enough of. They’ll destroy their businesses and yours if you let them. Break out the “Just Say No to Netbooks” posters, Steve! Be quick about it.

Photo Credit: Antonio Tajuelo