Netbooks are hot, but can the channel monetize?

In its annual Technology, Media and Telecommunications predictions for this year, consulting firm Deloitte says the fastest growing category of PCs in 2009 — and maybe the only category that does grow — will be netbooks.

In case you somehow missed them, netbooks are very small, very cheap notebook computers, suitable for people with modest computing requirements. Some run Linux, some run Windows XP (they’re about the only PCs you can still buy with XP installed). Prices are around $300 to $400, which is no more than a good smartphone.

These things don’t have the power for heavy-duty computing. They’re almost portable thin clients, though they do have enough local processing power for basic productivity tasks. If you want something cheap and light to do web browsing, e-mail and a little word processing and simple spreadsheet stuff, they’re ideal.

The big opportunities for netbooks are in the consumer and education markets. Jay McBain, director of small and medium business for the Americas at Lenovo Inc., says consumers buying their first computer will account for a fair chunk of the sales, and households purchasing a second or third machine — maybe something for the kids so Mom and Dad can actually get to use the main computer (or is it something for Mom and Dad to use while the kids are playing processor-intensive games on the dual-core system with the 22-inch monitor?).

Schools will be big buyers too, as they want something cheap for kids to use in class, says Darren Leroux, product manager for commercial notebooks at Hewlett-Packard (Canada) Ltd. University students might have netbooks to carry to class in addition to more powerful computers in their residence rooms or apartments.

Netbooks aren’t likely to replace laptops in business. But McBain says they open up some new possibilities.

Think small businesses that couldn’t afford to do sales-force automation because it would mean equipping all their sales people with costly laptops. Or blue-collar field workers who could use a computer but whose work environment means too much wear and tear on them.

You don’t want to give a thousand-dollar, several-pound laptop to someone who climbs power poles for a living, McBain says. To start with it’s too heavy, and second you can’t afford to replace the ones that inevitably take a fall.

But at a couple of hundred, when one drops 25 feet, “you pop the (presumably solid-state) hard drive into a new one and you go back and climb more power poles.”

So, think of netbooks as opening up new opportunities by making hardware more portable and more affordable. And Leroux doubts that they’ll cannibalize sales of traditional notebooks.

Selling the netbooks themselves doesn’t look like a license to print money. They’re cheap, so the margins will be small. But in some cases, like the education market, volume could be substantial. “When you got into low price, low margin,” Leroux says, “you start to get high volume.”

Yet there could also be competition from giveaways. We’re already seeing netbooks being given away as customer incentives. McBain expects a surge in cellular carriers offering them at little or no cost with mobile voice and data contracts, as they do with cellphones today.

Give subscribers devices with bigger screens and keyboards, he reasons, and they’ll use mobile data services more — and that’s the main growth area for mobile carriers’ revenues today.

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Jim Love, Chief Content Officer, IT World Canada

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