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Summary:

You know that saying –- if it walks like a duck and quacks like a duck, then it must be a duck. Same goes for portable personal computers — whether you call them netbooks or laptops. Jen-Hsun Huang, CEO of Nvidia agrees. “Netbooks are not a […]

You know that saying –- if it walks like a duck and quacks like a duck, then it must be a duck. Same goes for portable personal computers — whether you call them netbooks or laptops. Jen-Hsun Huang, CEO of Nvidia agrees. “Netbooks are not a new category, instead they are just cheap PCs,” he said at a dinner last night with a handful of technology journalists. “It has [an] Intel (x86) processor and runs Windows XP, and to me that is a PC.”

He predicted that these low-cost machines will get more and more powerful in coming years, thanks to the rise of chipsets such as Nvidia’s Ion platform, which marries a powerful (but low-cost) CPU like Intel’s atom with a GPU and other related silicon. Huang compared the rise of netbooks to the introduction of the $999 PC back in 1997. That low-cost machine changed the economics of the computer industry, and now netbooks are driving prices down even further.

“The $399 PC is here to stay and it will get better and better,” predicted Huang. And that is not good news for Intel, which has gotten rich beyond belief because they have sold expensive CPUs with margins that could be envy of certain folks in Bogota. (Related Post: Netbooks & the Death of X86 Computing.)

Intel’s partner in crime, Microsoft Corp., has been pretty vocal about the impact of netbooks on its business. They experienced an 8 percent decline in their client revenues because of lower-priced netbooks that used the cheaper (and older) Windows XP operating systems. As I have noted previously, Intel isn’t going to be able to escape this price squeeze and cannibalization.

Excess capacities in the storage, memory and LCD screen business are going to force the prices of full-fledged laptops down as they struggle to compete with cheap netbooks.

Even though today’s depressed economy forced Nvidia to recently cut its sales estimates in half, Huang says he will continue investing more in R&D around his three core initiatives – GPU computing, mobile computing and visual computing.

“Sure people may not buy in recessions, but recessions don’t last forever,” he said. “I am going to invest more in technology and R&D this year than anytime before,” he said. And he is going to keep hacking away at the operational expenses of his company. “At the end of this PC recession, I want to be prepared for any kind of change.”

  1. I believe we are seeing a compression in margins in almost every product category around the world. Cars, computers, gadgets…you name it we are seeing a downward price spiral.

    Recessions don’t last forever. However, has the consumer mindset changed that is the million dollar question. Do $399 computers or cheaper allow a consumer to do what is necessary for them?

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    1. Netbooks are not laptops. Netbooks are for internet browsing and e-mailing purposes, if you want something with other applications such as Microsoft Office then you’d get a laptop.

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      1. Ahh, spoken like someone who has never utilized one themselves! Let me tell you, netbooks run anything you throw at em as desktop apps — and even a decent portion of older games. Microsoft Office needs to be run on a full-fledged desktop? You’re completely missing the points of A) Extreme portability coupled with B) MORE than adequate power. I’ve watched 720p with no problems on a netbook, as well as run multiple browsers, chat clients, Office apps, among other tools, all at once. Yes, it multitasks.

        Netbooks are indeed laptops, simply with a typically 1024×600 screen. If you can comfortably do your daily tasks on a 1024×600 screen, you can comfortably live all day behind a netbook. Both my wife and I already do, and after using a 10″ ‘Mac’ for half a year, I can’t look at a full size laptop the same — so excessively large.

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  2. Om I love you but I gotta agree and disagree.

    It is an inexpensive PC, but it also is: rugged, very small, has long battery life and is free of DRM.

    http://www.scripting.com/stories/2008/12/17/whatIsANetbook.html

    It’s got some new stuff not seen on laptops before *that matter* — you should get one to take with you to the next press event. I use Macs, like you — but I don’t travel with a Mac anymore.

    Another idea — walk over to the Apple store on Market with me and my white 7 inch Asus and I’ll take it out annd watch the crowd form.

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    1. That’s what she said.

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  3. I’m with Dave on this. My netbook runs the Mac OSX and Windows 7.

    And then there’s the battery life that lets me go most of the day without AC power. From meeting to meeting.
    With Office, hard disk storage, Wi-Fi, etc, etc.

    So it’s much more than an inexpensive PC !

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  4. So long as Intel, Microsoft, HP etc. can make nonzero profit on $399 PCs, what’s the problem? They have less margin at the low end, so what? This is how you get to ubiquity, lots of product sold at 3% margin with enough high-margin products sold to bring total returns up to a respectable 9-12%. Nobody makes 60% forever.

    Take a look at the price and margin on voice minutes over 20 years (or 120 years), and yet voice minutes per year are at an all-time high and rising. AT&T isn’t going anywhere and neither is the PC industry. If anything, PCs are just a nice piece of software away from taking over the market for set-top boxes, game consoles, BluRay disc players, car dashboards, etc. The box that can do it all will win over the box that does one thing, in the long run.

    Cheap hardware is a good thing, it enables everyone (except Intel) to move up the stack a layer and tackle solving actual problems rather than dumping a general-purpose tool in a clueless user’s lap.

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  5. Five years from now the battle will be smartphones vs. cheap PCs. If you put a DisplayPort jack on a next-gen smartphone with nViidia Tegra, you’ve got a pocketable device that, when plugged onto an external monitor, acts as computer, internet video set-top, game console, and car dashboard. Subsidize the hardware with a wireless data plan and AT&T/Verizon/Clearwire just turned the entire PC business into a feature of mobile phones.

    At the low end anyway. If OpenCL gets used to build something consumers want, local hardware will come back with a vengeance. Just because everyone can afford a supercomputer doesn’t mean everyone has a use for one though.

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  6. I am perfectly fine with my netbook, since I don’t use more than: Firefox, Thunderbird and Openoffice. That’s enough for my work. Linux does a great job.

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  7. Om,
    The difference I see is a technical one – for developers, especially those who need to go deep in the OS (gaming, video compression, etc), netbooks are different beasts as they have different CPUs than laptops and PCs.
    I tend to think of netbooks as embedded devices, while laptops are more “desktop” devices that are mobile.
    Tsahi

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    1. Statements like this qualify people as never having touched an Atom-based system before. Try actually sitting down behind one in a real world situation, or knowing the real story behind the chips, before making that evaluation. Netbook = Small laptop. I dare you to find the desktop application that doesn’t run on a netbook.

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  8. Something here reminds me of the mid-Nineties battle to establish the PDA market. The Palm Pilot was not as advanced as the Newton MessagePad in some respects, but it was successful because it hit the right combination of usability, features, power, and price. Netbooks strike me as a new class of device because they hit this interesting combination of usability (8-10″ screens wide enough for the web, good-enough keyboard size, easily portable), features (wifi, flash support, longer battery life), power (Intel’s Atom CPU, enough RAM, enough local storage), with a compelling price point.

    The other obvious influence is the rise of the “cloud” to the point where many are convinced that the most important quality of a computer is the ability to connect to the web and access all the content available online (YouTube included) .

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  9. Cheap pc’s are almost a dime a dozen these days. I suppose the practicality is mainly going to be determined by the application of the box. For me, a cheap pc works due to the fact that I would use it as my backup machine, media server, or whatnot. For me its better than having to crawl across craigslist for a sidewalk junker. :)

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  10. “Another idea — walk over to the Apple store on Market with me and my white 7 inch Asus and I’ll take it out annd watch the crowd form.”

    I’m having trouble coming up with a worse test of a products value.

    Yes, you’d get attention. Netbooks aren’t near as prolific as normal laptops. When the iPhone first came out a crowd formed around anyone who pulled one out.

    Things is, they’d look at it and go, “ahh, a cheap, tiny pc”.

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    1. Every time I pull out my Lenovo S10, loaded up with OSX, I *ALWAYS* draw a crowd. Its not because ‘its a cheap pc’, its because people look at it and at first think its a new Apple product. Once they realize its not, the real fascination starts..

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