Analyst lowers expectations of notebooks due to netbook sales

A financial analyst covering the tech sector, Vijay Rakesh of ThinkPanmure, has lowered his recommendations of Apple and Intel due to infringement of the notebook market by the low-margin netbooks. 

“We believe the netbook market is starting to make inroads into thecore notebook market as a more price-conscious consumer opts for thecheaper alternative,” he wrote in his Intel note this morning. Intel isaddressing the netbook market with its Atom processor, so the companyis not being cut out of the food chain; but Rakesh notes that Atomprocessors sell at much lower price points and carry thinner grossmargins. The Atom, he notes, sells for $20-$40 and carries a 45% grossmargin, while the Core2Duo sells for $140-$250 and carries a grossmargin of 56%.

We have stated on jkOnTheRun that the low price of netbooks make them almost an impulse buy which appeals to the mainstream consumer.  This market segment is the largest by far, much larger than the typical geek notebook set.  Netbook manufacturers are quick to state that netbooks make good secondary computers but that’s not how we believe mainstream consumers see them.  The average consumer just wants a simple computer in the home that lets them do the typical things they do on the computer, check email, browse the web and maybe do some light document work.  These are the tasks that the netbook excels at performing and consumers are discovering this in droves.

It makes much greater sense to them to spend a few hundred dollars on a netbook rather than get a desktop or notebook computer for a much higher price, even if it is not as fully functional.  Let’s face it, most folks don’t want to edit video or other technical tasks and netbooks are fine for what people actually do most of the time.  As more consumers discover this new genre of cheap netbooks the greater number of potential notebook sales will be lost and this is what the analyst is predicting will happen.

(via Barron’s)

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