Update: Microsoft has released its earnings report, and while Intel says netbook growth is slowing, the software maker says its numbers paint a different story — with netbook sales down 32 percent from a year ago during the same period. Overall, Microsoft is seeing a decline in consumer PC sales, but there’s still growth in the business PC sector. 

Intel reported its quarterly earnings yesterday, and several sites are reporting that the news doesn’t look good for the company’s low power Atom chips: Revenue from Atom processor sales was about 15 percent lower during the second quarter of 2011 than the same period last year. For the most part Intel is blaming declining growth in the netbook market.

Notice I said declining growth — not declining sales. In other words, netbook sales are continuing to grow. They’re not growing at the ridiculously fast rate that they were in 2008 and 2009. And that makes a lot of sense, because the product category isn’t brand new anymore. I suspect that iPad sales growth will level off eventually too.

At this point netbooks aren’t dead, as much as some folks would like to claim they are. They’re just a regular part of the PC market and sales of these little guys will likely continue to rise and fall along with other laptop and desktop computers. On the other hand, I wouldn’t be surprised if revenue from netbook sales stays relatively small.

The first netbooks to hit the streets in 2007 and 2008 tended to cost between $400 and $600 dollars. That was cheap at the time. Now you can find most netbooks selling for $250 to $350, and Asus even plans to introduce a $200 model this summer.

With growth in the netbook space slowing and profit margins on mini-laptops getting thinner as computer makers bring lower cost devices to market, it’s no wonder Intel is blaming netbooks as it lowers its outlook for PC sales.

But at the same time as netbook sales are leveling off, tablet and smartphones are flooding the market. Right now those product categories are dominated by ARM-based chips from Qualcomm, TI, NVIDIA, Samsung, and other companies. But Intel is working on next-generation Atom chips which will use significantly less power while offering better graphics performance than today’s processors in an attempt to compete in these new spaces.

So just as it’s a bit premature to declare the death of the humble netbook, it’s probably a bit early to count out Intel. The company is also pushing its new “ultrabook” platform for thin and light laptops with processors that are far more powerful than the Atom chips you’ll find in netbooks. I’m a bit skeptical that this product class will take off anytime soon (the promise of a sub-$1000 computer isn’t as impressive as it once was). But at least Intel is continuing to explore multiple opportunities.

Update: OK, as mentioned above, Microsoft has weighed in. The company is probably in at least as good a position as Intel to have a finger on the pulse of netbooks. I have no idea why Microsoft and Intel appear to showing different numbers — but if you take Microsoft’s figures at face value, it looks like netbook sales might actually be declining.

There are plenty of reasons this could be happening. While some folks will point to the Apple iPad and other tablets that serve many people’s portable computing needs, others will point out that prices continue to fall for 11.6 inch and larger laptops which offer better performance than a netbook for not much more money.

We’ve also seen a fairly small number of new netbooks hit the market this year. Some of the computer makers I’ve spoken to say that’s because they’re waiting for Intel’s next-generation Atom chips. I suspect we’ll also start to see machines with ARM-based processors once Windows 8 hits the streets next year.

But whether the netbooks as we once knew them are on the way out or not, I say mission accomplished. While there will likely be a market for cheap 10 inch notebooks for some time to come, as long as I can find a range of portable computing devices that weigh around 3 pounds or less and cost around $500 or less, I’m a pretty happy camper. How about you?

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18 replies on “Intel: Netbook growth is slowing; Microsoft: Nope, netbooks are tanking”

  1. Netbooks became a has-been once Apple released their iPad and tablets took over.  A lot of people tried them when they were new, decided they were too small and underpowered, and moved on to the next big thing (an iPad or what not)

    But, this doesn’t mean computer makers will stop making netbooks tomorrow. Netbooks have carved out a niche for users who need to generate content on the road and want something very portable that doesn’t break the bank.  This niche is not going away; Intel’s next lineup of Atoms look to have better performance while using the same or less voltage.  Even if Intel didn’t supply those netbooks with chips, AMD will happily put C-50s or their next generation of netbook chips in to those computers instead.

    My prediction: Netbook sales will level off but remain brisk enough to remain readily available.

  2. I’d contend that MS’s number for netbook sales has MS Starter as a prerequisite portion of the definition.  So they’e by definition excluding the high end netbook and anything that would be considered an ultraportable instead of netbook…  Or anything that shipped with Linux (although those are few and far between).

    So yeah.  The netbook as defined as something with an intentionally gimped processor, small screen, limited memory expansion, and stripped down OS that doesn’t let you modify the screen background without paying for a pretty much full price upgrade, do probably have declining sales.

    But no, cheap ultraportable machines that offer ‘just enough’ computing power, long battery lives, and are primarily focused on mobility probably aren’t suffering from declining sales.  In fact from what I’ve seen they’re doing very well thank you.

    I also giggle at using MS’s numbers for predicting PC sales since they by definition exclude the 3rd largest PC manufacturer right now, who just happens not to use MS’s OS and are hence excluded from their sales numbers.  It doesn’t have any impact on Netbooks per se, but it is interesting.

    At the end of the day it comes down to how you define the term netbook.  Intel and MS went to great lengths to try to prevent netbooks from cannibalizing their sales, to the point of specifying strict memory and screen resolution limits to insure volume discounts.  Given how trends have changed and how premiums on laptops have fallen though, I’d say they failed. Brazos is just one end of that spectrum, CULV and the new ULV celeron’s that Intel is offering is really the other end of that spectrum.  More computing and graphics power than a traditional netbook, but low enough power draw and low enough thermals to fit in the same package.  That’s killing off Atom based netbooks more than anything.  But depending on how you define things, they still are.

    Netbook is a marketing term.  It’s dying.  Oh well.  Vive la resistance!

    1. I would counter to say why the heck are people adding another term to the mix? Ultraportable? Seriously? How about that’s actually a netbook with some premium features or pricing? Big deal. It’s not smart in my opinion to be saying adding “ultraportable” or “ultrabook” to the pool of definitions makes sense. It doesn’t. I laugh at the ultraportable speakers because all you’re talking about is a netbook that happens to have slightly better specs. Fact is you’re still talking about a secondary laptop and to me, that’s a netbook. So I say simply, ultraportable this.

      1. Ultraportable is an older term than netbook, and has been used interchangeably with “subnotebook” for decades.  “Ultraportables” like the PowerBook Duo line and Sony Vaio X and C series were showing up in the 90’s.

        Ultrabook, however, I agree upon.  It’s just another term without meaning to muddy up the waters.

      2. >> Fact is you’re still talking about a secondary laptop and to me, that’s a netbook. So I say simply, ultraportable this. <<

        My 11.6" with Core i3 @ 1.33ghz, 6GB RAM, 320GB HD, HDMI port and no internal optical is my primary machine.  At home I connect it to a 23" monitor (and sometimes my old 19" simultaneously) and trackball but use my laptop's keyboard.  MS Office 2010 and 2-3 different browsers with many open tabs run without a hiccup.

        My guess is 90% of laptops sold today have the same 1366×768 resolution as my 3 pounder and most get worse battery life and cost more.  While I would like a backlit keyboard for evening use, I rarely need an optical drive but have one at home.  I keep a 4GB SD card in my laptop and have a 4GB flash drive on my keychain for easy file transfer with coworkers.

        The only thing I compromise over most laptops is 2 pounds of laptop + 1 pound of AC adapter most people carry.  Those extra 3 pounds add up for a daily mass transit user and I can easily use my laptop on the train though its more likely I'll use it to watch part of a movie during my trip home.

  3. It’s a game of lampshading going on.  With the next gen Atoms and whatever will come of the Fusion/Bulldozer mashup, “netbook” and “cheap ultraportable” will be interchangeable terms.  Windows 8 on Tegra 3/4 or TI SOCs will cloud the issue even more.  The $350 market *should* bend to light 11″ multi-core machines, with “true” netbooks sinking even farther below $200.

  4. Brad I always come at this with the same point of view. If I was publishing reports of figures, but in my definition, a netbook is 9 inches or less, then I would report that netbook sales are dead. So it would be much more professional to say that 10.1″ laptop sales are declining.

    To me these whole debates or reports are a farce. You will have half the public considering something 11 inches or 12 inches as a netbook. So they read blah blah about netbook sales doom and gloom. Those same people would also be misinformed because the 11 inch and 12 inch sizes are probably doing rather well. Even to say 11 inch, I’m sure there is great sales in that size.

    So really it’s about this. What are these reports using in their “netbook” definition? Atom sales only? 10.1 inch only? 10.1″ with Atom and Windows 7 Starter only? That’s the whole story here. This is all about misleading, misinformed, sloppy reporting or stats.

    The whole story here could be in the fact that “netbooks” have evolved into 11 inches. So look no further than when these came to market in the 7 inch form. When they moved to 9 and even 10, they were netbooks by definition. Most so called experts say uh uh, that 11 inch is no longer a netbook. Ok, whatever.

    Consider first though your readership and the fact that consumers far outweigh the nerds out there who are so picky about their definitions. Don’t bother with the “netbook growth is slowing” headline when it should read something about how the 11.6″ form factor is in fact where consumers are going. Or remove “netbook” and say “10.1-inch” growth is slowing. After this many months and years I don’t expect much from the so called experts to actually one day decide what a netbook is and how doing so might be helpful to the consumers out there.

    1. Unless they’re being intentionally dishonest then netbooks are low end 7″ to 12.1″ basic, light, and low cost systems, primarily with Intel ATOM but also AMD Fusion. 

      Intel pretty much sets the standard and they state 7″ to 12.1″ can be a netbook and most people think that anyway.  So only confusion would be the overlap with ultrabooks, which are pretty much CULV laptops that now extend down to the netbook size range and this includes the 10.1″ size if you include over $1000 systems with companies like Panasonic.

      I’d agree though that there is a lot of misinformation going around.  Brad is correct for example to point out that what has declined is primarily growth, which happens when a product reaches market saturation and talks of decline have been greatly exaggerated.

      While some have an invested interested in helping to end the netbook market because unlike the rest of the market it provides very little profit for them.

      So I’m not surprised MS has gone out and stated there is a decline when they are so close to expanding into the ARM market with Windows 8.  Not to mention there has been a decline in the number of systems sold with Windows only, as some models are starting to offer alternatives again and MS dominance is starting to slip a bit.

    2. uhh, i think netbook sales are just taking a dive, who wants a 3-4 pound mini notebook that doesnt really do much, when you could have just the screen with multi touch capabilities and just as good if not better hardware.. im talkin bout tablets, they came in and pushed netbooks out, netbooks became popular because of their portability, but now 3 years later, theyre not so portable..

  5. While I don’t think netbooks are gone for good, it’s good to note that they did what they came to do, which was lower the price of ultraportables.

    I bought one of the original 7″ EeePCs because the price was right. At the time, the only other option close to that size was over $1500. Granted, it kicked my EeePC 4G’s butt all over the place, but I couldn’t afford it.  Now with decent hardware making its way down into sub-$500 ultra-portables, maybe it’s time for netbooks to become a small niche market, instead of the behemoth they were 2 years ago.

  6. I have both an 11.6″ HP dm1z and 10.1″ Acer netbook.  The dm1z never leaves the house and I love its balance of everyday performance and battery life.  Plus the screen size is just right (I was coming from 15.4″ and 15.6″ laptops).  

    I use the netbook when I need mobility and do short stints of word processing, emails and web browsing.  It might sound crazy, but I find the dm1z too heavy to carry around on trips.  

    In short, I love the fact that netbooks have opened up options and access to affordable ultraportables.  Now, let’s see the prices of top-tiered tablets (including the iPad) go down to around $300.

  7. I have a 10″ 1366×768 Atom powered Netbook with 2GB RAM and a barley larger 11.6″ Core i3-380M 1.3 Ghz non-Netbook with 6GB RAM.  Both give 6+ hours battery life (6 cell Netbook) and weigh around 3 lbs.

    I only carry the Netbook when I may leave my laptop in my car for a while.  I only paid $450 for my better machine and the price difference is easily worth it.

    Unless netbooks can deliver usability for no more than $250 the compromises are worth it.

    1. Yeah, I largely agree. I’ve been using an Asus UL20A as my primary mobile computer for the last two years while my Eee PC 1000H sits on my desk collecting dust most of the time.

      Honestly I think the best thing netbooks did for consumers was show that there was demand for low cost ultraportables. If the entire product category disappears but you can still pick up a 3 pound laptop with decent battery life and a more powerful processor for under $500… I could live with that. 

      But I think as prices have been pushed even lower, there’s still room for the $250 – $300 netbook as well. Some folks really can’t afford or won’t want to spend the extra $200 on a computer that’s likely to be a secondary machine. 

      1. Hands down the 11.6″ Acer.  Everything runs with no lag, doesn’t weigh any more, plays DVD images without stutter, HDMI (and VGA) port, similar battery life, and size difference is insignificant.

        To be accurate my Acer 1830T came with 3GB of RAM. For $30 I replaced a 1GB stick with a 4GB stick to get to 6GB so $480 is more accurate for my configuration.

  8. You’re sceptical of ultrabooks, and I’m sceptical of the netbook ever going away in the next few years.

    Let’s not forget some strengths of the netbook: size, price and portability. Then let’s not forget another market which really cares about weight, portability, design and who could careless about processing power. Yes, I’m talking about a good portion of the ladies.

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