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You’d think that comparing netbooks to Apple iPhone isn’t fair. After all, netbooks are phones and the iPhone isn’t a notebook right? I think this is worth a comparison however, mainly because Apple continues to see netbooks as a "niche" product market and also due to […]

3q2008salesiphonesnetbooksYou’d think that comparing netbooks to Apple iPhone isn’t fair. After all, netbooks are phones and the iPhone isn’t a notebook right? I think this is worth a comparison however, mainly because Apple continues to see netbooks as a "niche" product market and also due to some thoughts that the iPhone can replace a portable computer.

Putting aside the debate of whether we’re comparing Apples to netbooks Apples or not, let’s look at sales numbers for the third quarter. Last week we saw smartphone numbers out of Gartner and they showed 4.7 million iPhones shipped. DisplaySearch just reported netbook sales for the same quarter and they came in 5.6 million units sold.

Let’s put these numbers in another light as people so often discuss Apple’s staggering growth in the mobile phone market even though it’s a market they only entered in June of 2007. It truly is staggering that they can capture so much market share in less than 18 months. But the first netbook wasn’t even available when Apple’s first iPhone handset arrived. In fact, you need to wait another four months or so for the original Asus Eee PC 701, which we saw around October of 2007. I’d call that the unofficial "birth" of the netbook market, meaning it’s a younger product than the iPhone. Yet it has now surpassed the iPhone in terms of sales and it’s doing so at a faster growth rate.

It’s interesting to watch how long Apple will continue to play a "wait-and-see" attitude towards this "niche" market. Of course, that’s a public "wait-and-see"; nobody outside of Cupertino’s closed doors truly knows what’s happening behind the curtain in private.

I still believe that there’s room in Apple’s product lineup for a less expensive computing device sitting between an iPhone and the MacBook. In fact, there’s been much talk of integrated 3G in netbooks of late, and particularly in carrier subsidies: consumers pay a low price for the netbook and commit to a data plan with a carrier which reduces the initial outlay. It’s a method that’s already in place for the iPhone 3G, so is it really a stretch to think it couldn’t be applied to Apple’s version of a netbook, whatever that might be?

  1. I’ve made a similar suggestion in the medical context for a device midway between a tablet and an iPhone at http://www.hcplive.com/mdnglive/articles/NE_Love_for_Tablet_PCs

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  2. You’ve forgotten the iPod Touch – you need to add iPod Touch sales figures to be meaningful.

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  3. Mickey, The device you’re describing is what I’m waiting for. A cross between an eBook reader, iPhone and Netbook.

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  4. Michael Corter Tuesday, December 9, 2008

    You miss out a couple of important points.

    Firstly, to what degree are netbooks cannibalizing existing laptop sales? Are people mostly buying NetBooks as a compliment to their existing laptop or as their primary laptop? Because if this is the case then the actual value of the PC market *decreases* in respect to ASP. Whereas with the iPhone, Apple had the opportunity to greatly increase their iPod ASP. The cell market is so large that just a few percentage points of share for the iPhone would equate to billions of dollars of revenue per year.

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  5. The only problem with this comparison (assuming the numbers are correct) is the 4.7 mill represents units sold by ONE manufacturer and effectively one channel (or two at most) per country. The 5.6 mill is divided up among several manufacturers and no such channel limitations.

    The next problem is the iPhone represents a segment of a much larger market segment–smartphones. Netbooks, well that’s it. That is the market size. There is a greater likelihood for growth in the smartphone market (and the broader cell phone market), but for netbooks, again, that’s it. So essentially and effectively, netbooks have reached their potential.

    That’s just a quantitative assessment.

    On a qualitative level, a netbook, on its own, is a dead end product. A full fledge notebook is not that much more expensive nor much larger, yet far more powerful. For the on-the-run web surfer, more portable devices such as the Storm or iPhone exist. The netbook is neither portable enough for people who want portability nor powerful enough for people who want portable power. It looses on both ends of what it could promise.

    No doubt, people who _want_ Apple to enter either the tablet or netbook market must feel that the only hope is that Apple could invigorate the market. I am sure Apple appreciates the compliment, but if the market isn’t there, it just isn’t there. Apple has failed on things they believed in. Why would you want them to jump into something half heartedly that already barely exists? That is a guarantee for failure.

    Joe

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  6. Richard Garrett Tuesday, December 9, 2008

    Good comments all. I think Joe has probably captured Jobs thinking pretty effectively. Meanwhile, J&K have discussed elsewhere how the netbook market could open up the market for the iPhone/Storm, etc. The netbooks might point to one thing though – the iPhone and Touch both seem over-priced in comparison and so netbooks might serve to help drive down Apple’s prices – and erode their earnings.

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  7. I wanted to say exactly what Joe has said.

    You are comparing one product against a complete market segment covered by perhaps 100 manufacturers. If apple took 10% of the netbook market, that would be just 0.5 million units.

    The low-cost notebook market comes with too many risks at the moment. I see no reason why Apple should risk devaluing their other products, product cannibalisation, having to increase expensive OS X support.

    As you say, there is a space in Apples product range but in my opinion netbooks are not the answer.

    Filling the hole that will be left by dwindling MP3 player sales and building on their money-making app store and video store is the key which indicates to me that a larger iPod touch with better storage, video, navigation, ebook, web experience and perhaps data-only 3G would be a more attractive and solid base to build on for the future.

    Steve

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  8. 1. How much do you want to bet Apple has been working on a netbook long before you ever heard the word netbook?

    2. Your numbers do not include the Touch, so they are highly skewed.

    3. Your numbers take into account ALL companies selling netbooks compared to Apple (one company). Not a fair comparison in the least.

    4. I will be the first in line once they are introduced.

    5. Happy Holidays to you and your family. :o)

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  9. If you added iPod touch numbers in, it would beat all netbook sales from all the various makers as compared to just Apple! Without iPod touch numbers included there is NO point as netbooks are NOT phones.

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  10. Sure, Apple has room, and netbooks are selling like hotcakes, but they don’t fit into *Apple’s* grand scheme, and here’s why:

    Few people can get by with *just* a netbook. It’s not just an issue of power, or portability. It’s great for most things, in small doses. However, when it’s 4am, and you’re working on a term paper, you want a full keyboard. When you’re editing video, you need more horsepower. When you’re doing anything at all that’s either time or CPU/RAM intensive, and I don’t mean reviewing spreadsheets and responding to email, you’re going to want a bigger screen and a full keyboard.

    Why does this matter to Apple? Very simply, if they reduce the barrier to entry for the Mac “experience,” it’s going to be on a system with a sluggish CPU, low-resolution screen, and possibly lower RAM ceiling. It won’t be ideal, it won’t shine and sparkle, and without the glitz, they’ll get a lot of Mac netbook sales, but they’ll turn off so many potential converts that those people will never come back, since their first, “affordable” Mac will just come across as “cheap.” What Apple would want, most likely, is for you to get an iMac or even a Mac Pro, and a Mac netbook as the on-the-go counterpart. I’m not sure who’s sufficiently well-heeled enough to go down that road, since you’re now looking at a $2000 desktop, a $300-$500 netbook, and possibly a $200 iPhone to complete the “experience.”

    Personally, yes, I’d adore an Apple subnote/netbook, but I’m also crazy enough to accept certain warts with one. Jobs would never let such a beast ship, for fear that it would make the whole brand look bad.

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