66 Comments

Summary:

Seems everyone’s talking about netbooks these days. So I will, too since I’ve seen so much punditry of late that says Apple can’t charge their usual prices anymore, the economy is in the dumps, netbooks rule, Apple can’t ignore the market, etc.  Yes, we see a […]

Seems everyone’s talking about netbooks these days. So I will, too since I’ve seen so much punditry of late that says Apple can’t charge their usual prices anymore, the economy is in the dumps, netbooks rule, Apple can’t ignore the market, etc. 

Yes, we see a lot of figures going around about millions of netbooks sold, but what’s it mean to the bottom line? Are Acer, HP, Lenovo, etc. showing more profit from these things? These same companies will sell you a notebook that’s supposedly half the price of Apple’s, but that’s not where the money is. It’s cutthroat down there as each vendor tries to shave another penny off the price. They hope to draw you in with the price and up-sell you. 

Of course, netbooks use lower-cost components than cheap laptops, but they’re priced accordingly. If there’s precious little profit in a $699 laptop, I find it hard to believe there’s a lot of money in a netbook priced $250 less. And they’re getting even lower than that.

With the recent HP and Lenovo price cuts, it appears the big guys are shaving what’s left of the netbook’s profits. Won’t Acer, MSI, etc. have to follow suit? Yes. We’ve seen this in the PC industry time after time. What’s the point in this race to the bottom anyway? 

I think netbooks are primarily just the new cheap laptop. I can imagine someone shopping by price believing that $700 is a bit much when they can get something similar for two-thirds of that. After all, we’re talking about a Windows XP machine (sorry, Linux), it’s going to look “the same” to a lot of uninformed buyers. It wouldn’t surprise me if HP and Lenovo would prefer not to even play here, but they have no choice because if they don’t draw in that price-conscious user they can’t up-sell them to something better now or in the future.

However, the same rules don’t apply to Apple. While it’s possible to imagine someone thinking a netbook is “as good” as a cheap laptop, I don’t imagine any user thinking the same when comparing a netbook and a low-end white MacBook. No way. They’re worlds apart. I believe any user allegedly buying a netbook instead of a MacBook was never getting the Mac anyway. Apple knows this. If they get in this game, it will be with a complete product — more expensive than most netbooks — from which they’ll make a reasonable profit and not have to hope for up-selling. 

With the netbook, the PC industry may very well be creating a new monster. It seems likely netbooks will take sales from the low-end laptop market. In other words, all these PC makers are cannibalizing their low-margin product with something just as low-margin, if not more so.

And what if, instead of cannibalization, the netbook has actually created a new category of buyer? Someone who wouldn’t spend $700 on a PC but will spend up to $500. If so, then the PC industry has two razor-thin-margin products. I’m not sure how this is supposed to be a Good Thing™ for them. The PC netbook could be the hardware equivalent of Facebook: millions of users and no way to make money.

This is going to be fun to watch.

  1. I am 100% mac, that said, I just ordered up a samsung netbook. I am very excited about it. I used a friends ACER on a recent trip and other than windows, loved it. It did everything I needed.

    It’s about portability and simplicity. It’ll be my reader and used to keep on top of a small network of sites I have.

    Over the last couple of years I had a mini and two macbooks die on me, motherboard, hard drive, now one yet to be determined. “Go to the local macstore” does NO good as I travel out of the US. It’s as if great service options are to make up for frustrating hardware failures.

    I don’t think apple will even touch this area, and think that wise. I would rather see them keep focusing on what they already do, just please pay more attention to quality of components, I am willing to pay for it.

    Share
  2. I like this article. I’ve been debating with myself about whether netbooks are really worth going after for Apple. I think you are right about how low the profit margins would be for these products. I’m sure that we would see the big PC makers issue statements about how this market has grown x % and now tops x millions of units… but how much does it add to the bottom line? That will be interesting.

    Share
  3. I’ve got a MacBook and an Acer AspireOne netbook. After using the netbook regularly on a recent business trip, I returned home pining for my MacBook. Netbooks are not comfortable to use, have tiny screens, underpowered processors, and should not be considered a replacement for any full-power notebook/laptop computer, Apple or not. Mine, while it fits wonderfully, on the seatback tray in front of me while on the plane, has barely enough oomph to play video fullscreen. The standard 3-cell battery won’t power the Acer long enough to play a full-length feature film. For a person that wants to use one exclusively for web surfing (with limited or low-resolution video), email, and light word processing, it will be fine, especially when you add an external monitor and mouse. Otherwise, a person would be better off buying an iPod Touch or iPhone, which is probably as close as any Apple product will come to a netbook.

    Share
  4. So what do you think about so many people getting netbooks like the Dell Mini 9 just to turn around and slap OS X on it?

    That’s my plan. Seems like tons of others have the same idea.

    What does that do to Apple’s future netbook market when you can get a Dell running Leopard for $349?

    Share
  5. Dave,

    “So what do you think about so many people getting netbooks like the Dell Mini 9 just to turn around and slap OS X on it?”

    So many people? People have bought PCs to “slap OS X on it” for a while. Relatively speaking, it’s a small number; it hasn’t drug Apple into any of those markets, either.

    Share
  6. netbooks own. I’m writing the family christmas letter on my msi wind right now. I’ve been sitting here for 2 hours and still have 3 and a half left in my 6-cell battery. the keyboard is just as comfortable as one in my gigantic, ancient dell laptop or the full-size keyboard i use at work with my imac.

    i don’t know if netbooks are really creating financial problems for pc producers, and frankly, i don’t care. I was able to buy a little laptop that out-cutes all the macbooks down at the coffee shop for less than 500 bucks. if msi or dell go down, i’m sure that plenty more chinese-manufactured laptop makers will swoop in to take their place.

    Share
  7. You also forgot to consider the other elements of buying an Apple product – hidden costs:
    - Apple logo tax
    - Steve Job tax
    - Apple smell tax
    - Apple employee smiling tax
    - Apple store decorating / architectural tax

    By then, Apple’s “netbook” is what you have in today’s Macbook!

    Share
  8. The thing is, people are buying the MSI Wind in droves because it makes a perfectly useable, excellent macbook-nano, it runs osx faster than it runs xp home and it is very osx friendly.

    For more information, go to http://www.msiwind.net

    Share
  9. You’re missing the point. Most netbook buyers have a full-sized laptop for when they’re really trying to get things done. At the same time, they have a netbook for taking with them when they’re going to the beach, or going out for coffee, etc, where a full-sized notebook starts to get cumbersome. There’s plenty of room for both, especially if Apple were to step up to the plate with a wimax or or hsdpa card. There’s room in Apple’s line for a $400-$500 netbook, and it wouldn’t cannibalize profits

    Share
  10. Stop asking apple for what you think you want, and wait for them to tell you what they want you to want.

    Share

Comments have been disabled for this post