I was wrong; netbooks are anything but doomed. They're as popular as ever. Netbooks accounted for 11.7% of portable-PC revenue and 22.2% of shipments in the second quarter, according to a new report from DisplaySearch.
So it's time to buy leading netbook stocks such as Dell (Nasdaq: DELL ) , Intel (Nasdaq: INTC ) , and Hewlett-Packard (NYSE: HPQ ) , right? Not so fast. For as much growth as the sector has experienced -- total category revenue was up 264% year over year -- average netbook selling prices fell 29% in the second quarter, 10 percentage points more than the portable-PC industry average.
And that's a problem for vendors. Dell and HP make their margins on hardware, there's no value-added with a netbook sale, though a new partnership between AT&T (NYSE: T ) and Nokia (NYSE: NOK ) could change that. Either way, DisplaySearch's findings confirm two things:
- Consumers and businesses are taking to small form-factor computing devices.
- They aren't willing to pay much for the hardware.
Am I the only one who sees this as good news for tablet PC wannabes such as Amazon.com (Nasdaq: AMZN ) and, if we're to believe the varying rumors, Apple (Nasdaq: AAPL ) ?
Here's why: Most tablets are more likely to resemble a smartphone than a PC, but still possess the basic functions any computer user requires: email, word processing, browsing, etc. They're also more likely to be a home for the sort of value-added, downloadable software you'll find in the iTunes App Store and its peers.
This isn't to say that netbooks couldn't also benefit from their own app stores. But there's a cognitive disconnect at work here. PC and Mac -- and by extension, netbook -- upgrades come in big, $50-or-more packages, not in $9.99 downloads.
Creating app store demand among netbook users would require conditioning netbook users to think of their systems more as souped-up smartphones than lightweight PCs. Tablets won't face this problem.
Netbooks aren't doomed, but they aren't the future, either.
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