Defying gravity—it’s simply against the law

Posted: 02.02.09

Good to go, netbooks are a portable alternative to full-sized notebooks. They don’t replace, they accompany. (Source: Techlivez)

There’s a simple rule in the computer, and other, industries—sell-through trumps sell-in.

Companies that brag about having shipped levendy-leven million gizmos are not nearly as interesting or important as the ones who report they sold through (i.e., a consumer bought it and the dealer is ordering more)

So, when the market forecasters like us and others report that the market for say, oh, netbooks, has shown a gravity-defying upturn in a down market and that 10 million netbooks have shipped—be cautious. There’s no such thing as anti-gravity in any market, for any product—even milk sales go down in a recession.

What we expect to see is that, when Q1 gets reported, there will be far fewer netbooks sold, and/or many returned. Why? It’s called a recession, that’s why. There’s nothing wrong with netbooks, they will find their place, and they will contribute to the overall stimulation of the market—albeit with some cannibalization of the low end of notebooks.

Recently, we’re read that the game industry is recession proof, only to see Sony’s and Microsoft’s results prove otherwise. Then we heard oil was recession proof, last time I checked it was at $41 a barrel.

But what about netbooks? Regardless of the shipment spin, is this a real, sustainable, vibrant category?

I think it is, if kept in perspective.

Will netbooks replace or subsume notebooks?

We have two HP Mini-Notes, one with a 1.6 GHz VIA C7 processor and one with a 1.6 GHz Atom. They both have XP and we’re using Open Office and MS Outlook for our productivity applications. They work fine, but the VIA unit is slower in operation. The screen size is 8.9 inches at a paltry 1024 x 600, although with panning the VIA unit can support 1280 x 1024. They are small, you knew that, and blessedly light weight, so there’s little to no opposition in taking one anywhere you go where you suspect you might need a little computer time. In fact, I’ve been taking one on trips as my traveler and leaving my big 17-inch machine in my briefcase and as a base station at the hotel.

Would I want to spend all day and night on it as I do my HP widescreen Pavilion? No way. I believe in what I preach—the more you can see the more you can do—I need pixels. But if I’m reading, watching TV, playing a game, or even having dinner (well just after dinner) having a mini computer to jot off some thoughts or send a joke or two to friends is a perfect (for me) usage model.

So, the netbooks are not going to replace notebooks for a power user, or for any information worker who spends a lot of time in front of a machine. There will be some cases where economically disadvantaged people will use them as their main machine and I can see some grammar school kid applications as well. It’s not a game machine, least not the kind of games I play, but there are plenty of casual games that run just fine on them and many online games that don’t have challenging graphics or CPU

Are they going to save the computer industry? No. They’ll distract it, that’s for sure, but these machines are novel and people are still trying to figure them out and their place.

Will they expand the PC industry? Absolutely! This is a new price-performance point. This tests the price-elasticity of the market, and I, like many others, believe the limit hasn’t been reached yet. The netbooks will lower the industry’s ASP and that may impact investors POV about the industry’s worthiness and profit-generating ability even though volume increases.

So they don’t defy gravity, and their sell though is a TBD, but HP believes in them and HP is at the top of its game now doing just about everything right. Dell has a couple of models too, we hear Lenovo may launch one and, of course, Asus is way out in front on this. With all that product, a channel hungry for something to stimulate the consumers, and a recession, I think the netbook can’t help but do well—it just can’t break any laws doing it.