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Why HP, Dell and Toshiba Aren't Benefitting Fully From Netbook Sales

With sales up 43 percent year-over-year in the first quarter of 2010, according to Gartner — the highest rate of growth in nearly eight years — the mobile PC market is flexing its muscle. And it’s no coincidence that of the top five vendors in terms of market share, the two showing the most growth — Acer and ASUS — were among the first to embrace the netbook market.

WW Mobile PC Vendor Unit Shipment Estimates for 1Q10 (in thousands)
1Q10 Shipments 1Q09 Shipments Growth Rate
HP 9458.1 7676.3 23.21%
Acer 9122.5 6147.6 48.39%
Dell 5662.4 4254.3 33.10%
Toshiba 4573.9 3395.3 34.71%
ASUS 4324 2030.5 112.95%
Other 16233.1 10921.9 48.63%

Netbook sales grew 71 percent from the prior year quarter after cresting 36.3 million units in 2009 — a figure expected to top 58 million in 2010, estimates ABI Research. So why isn’t the strong netbook market doing more to help sales growth of HP (s hpq), Dell (s dell) and Toshiba? Answers vary based on the company in question. I uncovered one of them yesterday, while attending the Netbook Summit.

Eric Tilton, manager of networks and engineering for the Fresno Unified School District, told me his organization helped refine early HP netbook designs to optimize them for the education market. He suggests that HP netbooks are poised to do well in this market — over the next four to five years. Schools commonly run though long budgetary cycles, so HP can’t reap rewards in this market any faster. Consumers don’t face such cyclical fiscal constraints, yet HP netbooks can be pricey for the general public — last time I checked, a fully decked-out HP netbook could run you $700, near the current average selling price ($732) of a full notebook.

Toshiba, meanwhile, only offers two netbook models to choose from — one of which, I should note, I bought last year and absolutely love it — the netbook has a trackpad larger than that of some notebooks I’ve used. But as computers become smaller, they also become more personal, a thesis presented in our GigaOM Pro report, “The Future of Netbooks” (subscription required). And with only two netbook models, Toshiba can’t compete on personal choice with Acer and ASUS, each of which offer scores of different models.

On the other hand, Dell netbooks do provide many customization options. The base netbooks typically start at under $300, which sounds like a good deal initially, but these often run on the Intel (s intc) Atom Z-series processors, which are really intended for lower performing devices. To Dell’s credit, changing the specifications is an easy, though time-consuming, experience. Often, it results in a machine comparable in price or performance to a specific ASUS or Acer model that could be had without the configuration hoops.

While all the mobile computer vendors are enjoying growth, there’s something to be said when you’re first to a new market. Assuming you implement your product plan well, you’re likely in the best position to reap the largest rewards.

14 Responses to “Why HP, Dell and Toshiba Aren't Benefitting Fully From Netbook Sales”

  1. Kevin, you ask the right question, but I miss the more important answers.

    So, here’s my take.
    a) Even though Netbook sales are on the ascent, the gross margins per piece wouldn’t exactly be high.
    b) Every netbook maker needs to protect his notebook market as well. This adds pressure on both the netbook product and it’s pricing.
    c) Although consumers wish the netbook follows a CE price curve (instead of the PC price curve), the supply chain has a different perspective. To protect the notebook market, the prices of shared commodities (between the net and note books) will stay up there.

    There are people who probably believe ChromeOS will change the world of netbooks. Could well be the case, though, if this was truly believable, then I’d expect to see more momentum on ChromeOS (than, for example, the hardly-underpinned Google TV).

    • Good points made. And unlike other CE markets, the prices of netbooks have not been falling — they’ve stabilized as the products have gained more powerful configurations.

      I originally had high hopes for ChromeOS netbooks, but I don’t know if we’ll see them at all. And if we do, I don’t expect them to be sold for $100 (as commented above) unless they’re subsidized. Right now, ChromeOS appears to be taking a back seat to Android.

  2. I think one factor might be that the larger notebook OEMs, Toshiba, Dell, HP, have a lot of non-netbook products that are dropping in price. They might in reality be competing with their netbooks as notebook prices keep dropping.

    I just checked and you can today get an ultra-portable ThinkPad for $449. That competes directly with Lenovos own netbook line.

    • not only are manufactures compete against there own products with cheap notebooks, but they are blowing themselves away.

      while some people actually like the size of netbooks, lots of people bought them when they came out almost solely on price to save money. they tolerate a small machine not want one. it is time for netbooks to start rapidly dropping in price just like notebooks have in the last couple years. i also see no reason why larger(13-17 in) machines with simple atom processors, flash storage, and no optical drive only 1GB RAM would not be extremely popular if sold at a nice discount. not everyone needs what a full blown laptop can do.

    • Right, ASPs of notebooks are coming down, but if consumers were buying more cheap notebooks instead of netbooks, wouldn’t Toshiba, Dell and HP have greater growth? The data shows they are experiencing less mobile PC growth than the industry average…

  3. Totally agree, Kevin. Acer in particular offers are far better proposition in terms of netbooks and mini-notebooks than either HP or Dell just now.

    The 1810TZ in particular is an excellent example of how to do a small format portable right.

  4. i have been a bit disappointed that netbooks have not really been following the tradition of consumer electronics of steadily dropping in price. instead they have been improving quite a bit technologically but the base price is staying at about where the original eeepc started out. i would have thought we would be seeing $100 basic netbooks with flash storage by now. instead real notebook computers have dropped substantially in price and you can get one for only a little more. so when will the baseline price of netbooks start declining?

      • that could be ok. but i hope they do eventually show up. i also hope we see cheap chrome machines significantly larger than netbooks. i know a lot of people who probably should not be using full function computers(because they are totally unable to keep them virus free and do not have the slightest clue what a control panel is or even a slight understanding of the file system) but i am not at all convinced they would be willing to settle for something with a 9 or 10 inch screen. i would really like to see 14 to 17 in. chrome laptops at super low prices compared to windows machines for people who do not do anything off the web anyways. i believe they would be a huge hit.