12 Comments

Summary:

We’ve been saying this would happen since the first cheap mini-notebook hit the scene, that notebook OEMs were going to be getting a bit nervous about the low margins these little laptops are exposing.  The New York Times agrees and has published an article that looks […]

Hp_mininoteWe’ve been saying this would happen since the first cheap mini-notebook hit the scene, that notebook OEMs were going to be getting a bit nervous about the low margins these little laptops are exposing.  The New York Times agrees and has published an article that looks at this concern in detail and sheds light on what some of these big OEMs are thinking today.  The article looks at Dell, Acer and HP and describes what they are feeling and how the explosion of this market has forced them to produce products of their own. 

A quote they have from a conversation with Fujitsu that explains why they haven’t entered the "netbook" market:

“We’re sitting on the sidelines not because we’re lazy. We’re sittingon the sidelines because even if this category takes off, and we getour piece of the pie, it doesn’t add up,” said Paul Moore, seniordirector of mobile product management for Fujitsu. “It’s a product thatessentially has no margin.”

That’s the biggest factor impacting the big guys, the low margin that cheap mini-notebooks have by design.  There’s not a lot of wiggle room in the margin when some of these netbooks are going for $300 and more importantly there’s not a lot of room for the OEMs to distinguish their product from the competition.  Anything new you add affects the cost and even a small price increase ends up being a large percentage increase for the consumer.

I agree with the author of the article that the notebook OEMs have long been looking to produce and sell the most powerful and thus feature-laden products.  This keeps prices up high and margins equally as high and these cheap laptops fly in the face of that plan.  This is what I think is giving Microsoft so much trouble with Vista currently, they’ve long convinced consumers that more bells and whistles mean a better product but this mini-notebook genre is flying in the face of that logic.  Thin and light is in, at least for the foreseeable future.

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  1. must be an old quote from Fujitsu, because i’ve had my hands on the prototype for the last 1 1/2 weeks, along with the new Sony proto for 3 days.

    be very very careful of what you believe about these PR statements companies give out, they are so often bent & full of half truths it isnt even funny. i have been dealing with these guys for years. the samething was said when Dell came in & started crushing the competition by offering $400-$500 mainstream 15″ laptops, now almost all the big players have entry level machines. bottom line is they wouldnt do it if they didnt make a profit, the subnotebook market is far to niche for them to have been “forced” into creating their own version. they did it because there is a PROFIT involved pure & simple, nothing else.

  2. pimlicosound Monday, July 21, 2008

    I think we’ve yet to see a potentially very profitable market sector exploited by any of the big OEMs, and that’s mini-notebooks around the £500-£700 range.

    The increased cost could easily bring with it much greater features, like slimmer carbon-fibre chassis, dual-core CPUs, more RAM, faster HDDs, etc. I think consumers would see the value in such a product at this price point. It’s not prohibitively expensive for consumers – it’s nowhere near the £1200+ demanded by Asus and Sony for their high-end ultra-portables; but it’s much, much more than one gets from an Eee PC or an MSI Wind.

    It would also allow the manufacturers to distinguish their products with more diverse feature sets and to make a decent profit.

    I have an MSI Wind, and it’s great, but it does feel cheap and it’s a little weak. If someone can make a truly high-class mini-notebook – good enough to be a primary computer, yet around 10″ in size and for about £600, I would buy it.

  3. @pimlicosound: At a time when a lot of people are complaining about how netbooks aren’t $300, your post is refreshing, and I’d agree.

  4. They should have rewritten the headline: Don’t but a Netbook pleads PC industry! As I noted in my response, last week Intel began talking down its Atom chip for Netbooks:

    Intel CEO Paul Otellini was quoted as saying: “(Atom) is less than a third the performance of our Centrino (processor). You’re dealing with something that most of us wouldn’t use.”

    http://www.last100.com/2008/07/21/dont-buy-a-netbook-pleads-pc-industry/

    How curious.

  5. CariqDeville Monday, July 21, 2008

    some of you guys writing these articles need to get a clue, Kev & Steve. instead of just cutting & wrapping old news. Fujitsu does have it’s own netbook in the works, i’ve already seen numerous pics of it. other OEM’s have already leaked that Sony is making 1 as well.

    the reason companies are backtracking is simple, when these devices were originally being marketed it was as a secondary machine only. which meant NO profit loss, only pure gain (because you still need a primary PC). but now that consumers are seeing these PC’s are powerful enough for 95% of their daily tasks they are passing on the bigger more powerful PC’s. why? because for the AVERAGE user if you dont need to watch HD movies or play games then you really dont need the extra performance dual/quad core offer.

    essentially what they are trying to do is “prepare” all of us the the upcoming rising prices of netbooks. since they realize these devices are going to become lots of peoples primary machines they want to increase their profit margins.

    it seems like the only people that fall for this PR nonsense are bloggers & their readers. i’ve been in the back alley of the news world for 29 years & can translate what they really mean without even trying anymore. honestly it doesnt even take a degree to do it either, even your average teenager should know better.

  6. “essentially what they are trying to do is “prepare” all of us the the upcoming rising prices of netbooks. since they realize these devices are going to become lots of peoples primary machines they want to increase their profit margins.”

    BINGO!!!

    couldnt have said it better myself.

  7. James Kendrick Monday, July 21, 2008

    That quote from Fujitsu was a direct quote to the New York Times in the article referenced and thus not “old news”. Instead of shooting the messenger if you don’t believe that statement then call Fujitsu on it, why don’t you?

  8. Don’t shoot the messenger, indeed. Well said James.

    @ CariqDeville

    Of course we’re already seeing Netbook prices creep up as OEMs add more features and spec that move away from the original e.g. bigger screens, more storage etc. But, whether or not Sony and others are entering the market, the cat is out of the bag. Users don’t need most of the horse power available, most of the time.

  9. I think *some* people in the notebook industry are concerned, like people who work in the regular notebook sectors. On the whole, notebook makers should be pretty happy that they created a new market for 2nd and 3rd notebook buyers. These small notebooks aren’t going to replace bigger ones because their screens are too small and processor aren’t powerful enough.

  10. The PCs that are being replaced are desktops. Standard size laptops are replacing desktops and netbooks are replacing standard size laptops. Personally, I think the sweet spot for netbooks is a screen size of about 8-10″ and about 1 to 1 1/2 lbs. Not quite there yet but getting close. As others have said, power is not a big deal since most are not using the netbooks for movies or games.

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