Leading computer manufacturers along with Intel and Microsoft have inadvertently created a monster. And like Frankenstein, it is a monster they’d like to destroy. Although the industry’s hot-selling brainchild is physically quite small –perhaps more analogous to a gremlin in scale— with its small 10-inch screen, underpowered Intel Atom processor, cheaper version of Windows and under $400 price, netbooks are devouring corporate profit margins.
And if only words could kill. Last week at the launch of Windows 7, Microsoft CEO Steve Ballmer spoke about the dreams of the new operating system and showed off a group of new notebooks that ran the improved Windows, but none were netbooks. He remarked that many have been disappointed in the poor performance and graphics of the mini laptops, echoing almost exactly what Michael Dell had to say a week earlier. The CEO of the corporation that has a complete line of Inspiron Mini netbooks indicated that users are dissatisfied with the small screen sizes and limited power of them after 36 hours of usage. Bottom line: users would rather use a larger sized notebook, according to Dell. (Funny, I’ve been using the same netbook during travel and couch surfing for the past 18 months and I get far more mileage out of my netbook than that, Mr. Dell.)
Clearly, Dell along with Intel and Microsoft want to promote the sales of more profitable machines with full priced operating systems (not a cheap, eight-year-old version of Windows) and a higher powered processor and chipset. And can you really blame them, especially when we heard last week that Apple’s high-priced MacBook line is selling better than ever? When consumers choose a netbook over a more expensive notebook with a higher-priced processor and full $100 version of an operating system, the manufacturer takes a hit and makes little to no moolah.
The phenomenon isn’t new, however. Author of Disrupting Class Clayton Christensen refers to it as over servicing the customer base or “disruptive innovation.” If the vast majority of consumers simply do not need or use the amount of computer power in a typical notebook, then the innovation of the netbook appeals to them, thus fundamentally disrupting industry. And that is exactly what has been happening according to DisplaySearch’s latest numbers. The revenue of notebook sales has gone way down, while netbooks are up by over 200 percent.
But will Michael Dell and the other would-be netbook killers really destroy their own invention? Will they take the knife to the throat of the 10-inch, Intel Atom powered, Windows XP netbook knowing full well that customers are craving the product? They are trying to by releasing, with the help of Intel, a new crop of notebooks with larger sized screens that still maintain the long battery life of netbooks yet pump out more performance. Powered by Intel’s ultra low voltage processors the new products are about $200 to $400 more expensive than a netbook.
No doubt, consumers will buy these new thin and light laptops. The $800 13-inch ASUS UL30 has been getting rave reviews for its mix of battery life and portability. But those 10-inch netbooks will be hard to kill off. They line the shelves of Best Buy and continue to be the bestselling consumer electronics item on Amazon. And believe me, this upcoming holiday season that won’t be changing. People like the attractive price point and when they are living in the Cloud and enjoying the portable form factor it doesn’t seem to be a big issue that they are only useful for only a few hours at a time.
Netbooks struck a cord, which is why the Frankenbook will still be haunting Mr. Ballmer and Mr. Dell come next Halloween.