Netbooks have posed an interesting conundrum for PC makers since their inception a few years ago. These small, cheap, low power machines are relatively easy to produce and they’ve definitely filled a niche, with tens of millions of netbooks sold since they started hitting the streets in late 2007. And no PC maker has wanted to miss out on potential netbook sales, so every computer maker with the exception of Apple jumped onto the netbook bandwagon.

But netbooks aren’t just cheap to produce. They also sell for as little as $250 to $300 which doesn’t leave a lot of room for the kind of profit margins PC makers are used to getting from higher priced laptops. And so while big PC vendors like HP and Dell pumped out new low cost models in 2008, 2009, and 2010, I’m not all that surprised at a DigiTimes report suggesting that both Dell and HP are reducing their investments in 10 inch netbooks and that HP might even stop producing 10 inch netbooks and instead focus on 11.6 inch models with AMD processors.

To be clear, I’m counting this as little more than a rumor for now. But it’s tough to say that any company with the exception of Asus and maybe Acer jumped wholeheartedly into the netbook space because they expected it to earn big bucks. Instead, I feel like HP, Dell, Sony, and other PC makers got involved in the netbook space because they didn’t want to lose money to other vendors that were supplying machines that seemed to scratch a new itch.

As the market becomes more saturated with 10 inch netbooks, the cost of larger laptops continues to fall, and tablets like the Apple iPad compete for market share, I can certainly see why HP and Dell would at least be thinking about focusing their attention elsewhere. The netbook pie might not be as big in 2010/2011 as it was a year or two ago, and who wants to fight for a smaller piece of a smaller pie?

While I think there will still be demand for 10 inch, low cost, low power machines, it wouldn’t be the end of the world for low cost mobile computing enthusiasts if a few of the big PC makers do pull out of the netbook space. After all, the netbook revolution has already done something very important. It got people thinking about price, portability, and performance. The truth is we don’t need every new computer to have the most powerful processor around. If a cheaper processor offers decent performance at a lower cost and also happens to prolong battery life, that’s good enough for many people. And so we’re seeing a whole new crop of 11 to 12 inch light weight computers with AMD, Intel, and VIA low power chips and price tags between $400 and $700. That’s something we didn’t see in 2006. And if HP and Dell decide they’d rather focus on this class of computer and leave the netbooks to Acer, Asus, Samsung, and others, that’s fine with me.

Update: Dell spokesperson Anne Camden says the DigiTimes report “has no basis in fact,” and that the Dell Inspiron Mini 10 “remains an important member of our mobile platform portfolio.”

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6 replies on “Could Dell and HP pull out of the netbook market?”

  1. Netbooks are the greatest blessings. In the past many of us wanted light machines and a light machine cost US$5000 and above.

    90% of the buyers unfortunately who bought the ultra light machine later realised that it was too powerful for their needs as they just wanted to surf the Internet. Business travellers just wanted to check emails and their stock prices in the airports.

    Very few used their ultralight machines for Autocad, Gaming, Video Editing etc. If they did, they did it with their primary desktop super powerful PC at home.

    So consumers spent money unneccesarily.

    Netbooks, like Brad said, made people aware that all they wanted was a light machine just to surf the Internet. And they could do this for US$300 and below.

    Not only did netbooks save consumers a lot of money (as it prevented potential ultralight notebook buyers or made them aware that they did not need a super powerful ultralight notebook), it also saved companies hundreds of millions of dollars. Companies don’t have to waste on a $5000 machine for their top exec.

    At the same time, consumers can now carry their netbooks without fear of it getting lost. If it gets lost, most people would not feel the loss of $300 a big burden to them. But just imagine $5000 notebook getting lost?

    So, netbooks have made people less fearful. Leaving your netbook in Starbucks and going to the toilet is no more a problem. One does not have to urinate fast and worry that someone would steal their $5000 notebook.

    At the same time, insurance companies pay out less. Previously insurance companies used to pay out a bomb when people lost their super pricey ultralight. Now, it is no more the case. Thus, premiums have reduced. At the end of the day, consumer pays lesser to get their netbooks insured.

    Netbooks…It is indeed a blessing in disguise.

    HP and Dell would never pull out of the netbook markets because nowadays, consumers don’t want to pay anything more than a $500 for their notebook/netbook.

    For intensive work that requires CPU power, most people use their primary desktop PC at home.

    Soon, Smartbooks will change the scene.

  2. Its fine with me if they exit the market. I won’t be buying from either of them anyway. Dell doesn’t have ION, and HP has that stupid wifi card white-listing thing.

    Regards,

    Hans

  3. I think this is partly due to the fact they they are going to develop iPad competitors instead. I honestly think they see that netbooks aren’t that lucrative, but the way Apple does things, getting something like an iPad product will an iTunes-like product results in more revenue. Just selling a piece of hardware is a dead-end.

    Also, they’re really not that competitive. Seriously, when I optioned up a Dell to the same specs I can get on an Eee PC or Wind, the Dell costs more. Why? I think most people will just go with an Eee PC or a Wind…

  4. Yes netbooks are low margin and the large OEMs hated the idea. But the transition of computers from high margin nerd toy to low margin consumer electronics is here, adapt or die. Apple excluded of course…. for now the faithful keep their margins fat. (but Steve and his Reality Distortion Field won’t protect them forever)

    If Dell and HP are thinking of an exit I’d suspect they have realized the x86 based netbook is about to die. Who really needs the ability to run Photoshop on a $250 computer? Especially when x86 also carries either a weight or battery life penalty vs ARM to go along with the Windows 7 price and ill optimization penalties, especially with touch screens/tablet form factors about to become important.

    Both companies have such close relationships with Microsoft they would pretty much be forced to try selling WinCE instead of UNR or Android/Chrome in the consumer channels and that ain’t going to be competitive.

  5. profit margins are fine, there is a 100% markup on netbooks as they cost about $100 – $150 to produce, those are Apple level markups.

    HP & Dell arent going anywhere.

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