“You’d be hard-pressed to find a more perfect tech product for a global recession than the ‘netbook,’ a rapidly emerging category of low-cost notebooks. Often priced under $500, netbooks provide plenty of computing power to surf the Web, use e-mail and do other routine tasks. These machines are just the thing for someone looking for a cheap way to join the mobile-computing revolution,” Eric J. Savitz reports for Barron’s.
“Asian PC makers Asus and Acer have moved aggressively into the market, with a host of low-cost laptops, many powered by Intel’s low-cost Atom microprocessor. And Hewlett-Packard and Dell are rapidly catching up. Late last week, seven of the top 10 best-selling laptops on Amazon.com were priced under $600; the list included models from Acer, Asus, Toshiba and HP,” Savitz reports. “(The other three laptops on the top 10 list are from Apple, and are at the other end of the price curve.)”
“For the PC companies, the netbook revolution is fraught with danger. As they target volume, they risk damaging their margins. (Apple, as I noted here a few weeks ago, has declined to enter the netbook market.) The danger is that many people who’d otherwise buy more expensive laptops will find that netbooks are all they need,” Savitz reports.
Savitz reports, “In short, the netbook’s rise is likely to be accompanied by cannibalization of more expensive PCs, battering margins.”
Full article here.
This particular downturn is not creating a market of cheaper computers. That market has existed for some time and there are parts of that market that we choose not to play in.
I think when people want a product of the class that we make, over and over again people have done the price comparisons and we’re actually quite competitive. So we choose to be in certain segments of the market and we choose not to be in certain segments of the market. And the question is is the downturn going to drive some of our customers to those lower segments of the marketplace and get to buy lesser products? And I will be surprised if that happens in large numbers and I actually think that there are still a tremendous number of customers that we don’t have in the Windows world or in the other 99% of the phone market we don’t have who would like to and can afford to buy Apple products. So we’ll see what the ratio of those two things are but we’re not tremendously worried.
As we look at the NetBook category, that’s a nascent category. There’s as best as we can tell not a lot of them getting sold. You know, one of our entrants into that category, if you will, is the iPhone for browsing the Internet and doing e-mail and all the other things that a NetBook lets you do, and being connected via the cellular net wherever you are, an iPhone is a pretty good solution for that, and it fits in your pocket. But we’ll wait and see how that nascent category evolves and we’ve got some pretty interesting ideas if it does evolve.
What we want to do is deliver a lot, an increasing level of value to these customers. There are some customers which we choose not to serve. We don’t know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that. But we can continue to deliver greater and greater value to those customers that we choose to serve and there’s a lot of them. And we’ve seen great success by focusing on certain segments of the market and not trying to be everything to everybody. So I think you can expect us to stick with that winning strategy and continuing to try to add more and more value to those products in those customer bases we choose to serve. – 8Apple CEO Steve Jobs, October 21, 2008