Another Look At Netbook Cannibalization

Through the short time netbooks have been around, they have been attacked by many claiming they’ll cannibalize an already suffering market; with buyers opting out of higher-end notebook sales in favor of the diminuitive machines.

Mark Hurd of HP was recently interviewed on the subject. He says HP can’t say for sure yet if its sales are being cannibalized, due to the short time they’ve spent in the market, but he has his doubts:

“It’s not the move to netbooks that’s cannibalizing. What you have is someone buying a more thickly configured notebook, who’s now buying a more thinly configured notebook, and that’s what’s adjusting the ASP [average selling price].”

This explains the primary evidence most use for cannibalization: shipments are up, but revenue is down. It has also been suggested that the drop in sales would have been even more drastic but for the existence of the netbook sector, which offered cost-wary consumers an outlet to compute.

However, other analysts bring in the idea that Acer, whose massive successes in 2008 were in large part due to netbook sales, is using the netbook to take a chunk of the market previously owned by Dell and HP. The Acer Aspire One has been extremely popular, and has brought Acer to the top from its previous obscurity.

IDC analyst Richard Shim captured the rapid evolution of the netbook market quite succinctly:

“In just over a year, they’ve (netbooks) evolved from these Linux-based, solid-state devices into fully [Microsoft] Windows OS-based, 120GB hard drive systems, which are very similar to traditional notebooks. So we’ve had a dual effect here, with many netbooks becoming more robust and expensive, while notebooks have come into the same price range.”

Intel’s wariness in boosting the power of the Atom N270 led to the intentional capping of that chip’s power for the N280 update. This was done, of course in an effort to reduce the ‘damage’ the successful netbook chip was having on Intel revenues. Intel profits were crushed in 2008, so it’s possible that their anxiety was well placed. In the instance of the Atom N280, fears of cannibalization have directly affected the products offered on the market.

For now, the issue of whether netbooks are cannibalizing the industry is still unresolved. It’s important, however, to take a hard look at the numbers when making one’s analyses. There are plenty of alternative explanations for the seemingly paradoxical situation of an industry with greater sales and less profit, and they need to be investigated as well.

Via DailyTech.