The netbook is dead. Long live the notebook!

That's the message from NVIDIA (NASDAQ:NVDA) today. The company's low-power but high-powered Ion graphics platform is set to remove some of the very limitations that define a traditional netbook.

Indeed, the first couple of Ion-powered netbooks coming down the hatch do look a lot like smallish laptops. The Lenovo S12 and Samsung N510, both Intel (NASDAQ:INTC) Atom systems due to hit store shelves this summer, have low-end specifications in some areas, such as a smallish 1GB memory allocation and a mere 160GB of hard drive storage. But the Ion-based netbooks "can handle mainstream gaming, HD video, and new GPU-powered applications," said NVIDIA notebook products manager Rene Haas. "You might as well call them notebooks, because that's what they are."

Regardless of what NVIDIA says, I think we'll see system builders like Lenovo, Dell (NASDAQ:DELL), Acer, and Hewlett-Packard (NYSE:HPQ) sticking with the "netbook" term. The name has earned connotations of easy portability that is also easy on the pocketbook. I don't think Dell would want to trade those advantages for yet another high-performance laptop with weak storage components.

We could, on the other hand, see the portable computer market stratifying further this year. The Ion netbook, whether running Microsoft (NASDAQ:MSFT) Windows or Google (NASDAQ:GOOG) Android software, becomes the high end of the netbook segment. The low end of the fully featured notebook market should move up a little bit, leaving a couple of hundred bucks of a gap between the system categories. No Androids in the high-rent neighborhood, of course.

And then we have increasingly powerful smartphones filling in the blanks. The Apple (NASDAQ:AAPL) iPhone series is the model to beat or imitate, and it's both considerably less powerful and noticeably cheaper than a run-of-the-mill netbook (assuming you're willing to lock into a contract for a couple of years). Smartphones trade power and performance for ultimate portability.

So there's a portable computer for every need now, with clear demarcations between categories that should make it easier for consumers and IT buyers to pick their poison. Add in the imminent launch of Windows 7 and an economy entering rehab, and that clarification process should pour kerosene on the fire for the entire industry.

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