Netbook Is Nothing But a Cheap PC

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 (s NVDA) 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. (s MSFT), 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.”