Steve Felice, the President of Dell’s consumer and small and mid-size business unit, recently said that, “There’s been some over-exuberance on this product (netbooks) in the marketplace. Some of our competitors have positioned [netbooks] as a replacement device and then you see feedback from customers that are disappointed when they gave up their notebook for a netbook and find that it’s not quite as fast or doesn’t have quite the same functionality.”
Unlike their competitors, Dell has not been a strong proponent of a netbook as a laptop replacement, and their foresight is right on target. According to shipment figures reported by IDC this past April, there has been waning enthusiasm for netbooks in favor of higher-performance laptops. Intel Atom‘s share of the market has fallen to 20 percent during the first quarter of 2010 from 24 percent during the previous quarter, despite the fact that the overall volume of processors shipped rose by 4.1 percent.
Stronger demand for laptop technology is a blessing for Dell. The company’s first quarter revenue in 2010 rose 21 percent to $14.9 billion and profits rose 52 percent to $441 million. Dell did especially well in emerging markets like China and Brazil, where revenue rose 90 and 81 percent, respectively. Felice says, “We are very pleased with the overall performance of Dell.”
PC sales are on the way up, according to a recent IDC Worldwide Quarterly PC Tracker report last Thursday.
After three consecutive quarters of decline, worldwide shipments rose 2-3% compared to the same period last year. Laptops soared an impressive 33.5% increase, while desktops continued to fall.
As a result of these developments, the overall PC market is expected to rise 1.9% in 2009, and a tremendous 10.3% in 2010. Netbooks are thought to be having a big hand in the PC industry’s turnaround.
IDC’s Loren Loverde mentioned what he thought explained the turnaround:
“Once again, the PC market shows its resiliency. The speed of market stabilization and growth in key segments reflect the essential role of personal computing today. Technology evolution and falling prices remain a compelling combination. As commercial spending recovers in 2010, we expect to see robust growth over the next several years.”
Google says Chrome’s coming in 2010, and while some analysts correctly predicted that the project would be open sourced within days last week, the IDC is now saying that Google Chrome won’t see serious enterprise adoption for 10 years.
Analyst Al Hilwa of the IDC backed up this position by saying that, while updating on the cloud might be fantastic for Chrome OS netbook users, enterprises won’t easily get on board with the concept:
“[Cloud-based updates] are not going to eliminate problems. You’ll still have occasionally an update that comes in and it will screw up something. Enterprises don’t want to see that kind of thing. I think they’re making some bets on this and it will be interesting to see how it plays out.”
Furthermore, the fact that Chrome OS and the Chrome browser only run Web apps without access to downloadable local apps could be a turn-off even for netbook users:
“You wonder if netbook users are going to be okay with that, and if they will want to store everything in the cloud. Before it’s all over, there’s going to be some offline applications and then there will be some offline usage of data. They’re going to have Flash memory and people will store data locally. There’s almost no way around that.”
Based on that reason, Hilwa’s perspective is that Chrome OS will be a consumer phenomenon for five years, but it’ll be 10 years before Chrome OS can get 5% of the enterprise computing market in on the fun.
Global CPU shipments have reached a record high of a 23% increase in Q3 of 2009, and this is largely a result of an increase in demand for netbooks.
While unit sales increased 23%, revenues only increased 14%, due to the low unit price of netbooks. According to Shane Rau, the director of semiconductor and personal computing research at IDC, “since PC processor shipments overall just slightly exceeded shipments in Q3 of 2008 – which was itself a record quarter at the time – we know the processor market is recovering.”
While this currently seems to be a good situation for netbook and chip manufacturers, we still have to be on the lookout. Rau pointed out that a lot of Intel Atom processors are being sold into markets like China, which offer government incentives. “The Chinese market can be very opaque – there are lots of places where inventories can hide. We have to be on the lookout for when China decides it can’t consume more processors. Meanwhile, the U.S. market is still hamstrung by housing foreclosures and rising job losses.”
Image via Crunchgear.
The PC market in general beat or met sales expectations, with global PC sales posting a 2% gain. This was true across all regions except Japan – could they just be waiting for Windows 7?
IDC VP Bob O’Donnel says that despite the recession and other factors, the recent discoveries promise good things for the months ahead:
“[This]underscores the value that both consumer and corporate buyers place on PCs. With the forthcoming launch of Windows 7 and expected commercial refresh beginning in 2010, the prospects for future PC market growth are very solid.”
The IDC also came out with new rankings for PC firms, placing HP at the top of the US market with 25.5% of sales. This was after a 3% gain this quarter. Acer netbook sales sent figures soaring for the Taiwanese company, with 48.3% more sales this quarter. It’s the third biggest seller in the US now, followed by Apple (9.4%) and Toshiba (8.1%).
Dell, however, took a 13% plunge down to 25% of the market.
Gartner and IDC are pointing out that Apple is lagging behind competitors HP, Dell, and Toshiba, partly due to its lack of a netbook competitor on the market. This week’s report by IDC claims Apple will be in 5th place this quarter, with 1.21 million units sold.
Apple got fourth place with 1.4 million units in Gartner’s estimation. Analysts are suggesting that Apple isn’t ranked better because it doesn’t have an inexpensive offering for netbook consumers.
In April, Apple CFO Tim Cook told analysts that netbooks are “not a segment [Apple] would choose to play in.” An IDC analyst says this might be a mistake – the netbook market has exploded due to a market of budget buyers seeking relief from the economic downturn. Bob O’Donnell told the Associated Press how this relates to Apple:
“People are focused on $600, $700 notebooks… Guess what Apple doesn’t have: any notebook below $999.”
Market research firm IDC has recently increased their prediction for netbook sales for 2009. Previously, IDC had predicted notebook sales to be roughly 22 million, but has recently increased this number to 26.4 million. They contribute this increase in netbook sales to growing demand in Latin America, Asia, and the United States.
Also contributing to the increase in netbook shipments is the sale of subsidized netbooks from telecom companies. Netbooks are prized for their portability, and more and more companies are trying to break into this market.
Acer has revealed that it plans to ship its Android-based netbook in the third quarter of 2009 but it is not sure how successful these netbooks will be in competing with netbooks that run on the Microsoft Windows operating system.
Dell is trending towards the sale of larger-sized netbooks. Today, Dell stopped selling the Mini 9, which started selling in September 2008 for $349 but in recent weeks dropped to $249.
Dell is emphasizing netbooks with a minimum screen size of 10″ and larger keyboards. The company asserts that these changes are in response to customer feedback and preferences. Like many other computer manufacturers, Dell has been affected by the faltering economy and netbook sales have helped Dell keep its head above water.
According to market tracker IDC, Dell’s sales jumped seven-fold during the first quarter of 2009. ABI Research, another market tracker, predicts that shipments of netbooks will be in excess of 35 million and rise to roughly 139 million by the year 2013. The relatively low price tags of netbooks are making them more and more appealing purchases to consumers.
Image via NewTechnology.
Fears of netbooks cannibalizing PC sales may have been realized in full. PCs are selling worse than ever, according to an IDC report last week.
Worldwide PC processor unit shipments 4Q08 declined 17% quarter over quarter and 11.4% year over year. However, even these dismal numbers are misleading, for they include the Intel Atom chips that we know are responsible for powering the vast majority of netbook computers. Take those out and the decreases grow to 21.7% and 21.6%, respectively.
According to Shane Rau, who directs the IDC’s Semiconductors in Personal Computing research section, said what it all really means:
“[The] decline in PC processor unit shipments in the fourth quarter was the worst sequential decline since IDC started tracking processor shipments in 1996. After hinting at a decline last September, the market fell of a cliff in October and November.”
The drop in end system demand was in part credited to “tightening consumer spending”. Vista was too expensive for many, and netbooks, with their low cost and XP on the inside, looked quite a bit more attractive. Also notable is that a quarter of netbooks run Linux, another ode to the fact that consumers are being more cost-savvy.
Will this trend last? It seems doubtful. As soon as the economy picks up, PC sales should as well. That still leaves the question of netbooks; as a machine for the market of low-spenders, will they get lost when disposable income for the masses grows?
Not only are netbook sales set to explode in 2009 and beyond – they’re also supposed to brush aside ultraportable laptops in the eyes of consumers.
According to the International Data Corp, 20.6 million netbooks will be shipped this year – twice as many as ultraportables. Ultraportables are a size up from netbooks, coming in at about 11-13.3 inch display sizes and 2-4 founds. They have made up about 8-10% of the notebook market, said one IDC analyst.
As of 2009, however, their piece of the consumer pie will drop to a mere 5.7%. To contrast, netbooks will crank it up all the way to 12.3%. O’Donnel of the IDC summarized it succinctly: “Mininotebooks — which is what we prefer to call them because ‘netbook’ is an Intel marketing term — are having a big impact on ultraportables.”
UMPCs were factored in as well, and are expected to sell barely a million devices this year. This is three times the number in 2008, but little compared to netbook sales. Their sales may grow in 2010 as well – “They’re enjoying a very slow climb, but they’re too small and too underpowered,” said Kevin Burden of ABI.
The only portable sector not yet outsold by the netbook category are, of course, laptops. IDC puts their sales at a 15% increase over 2008, raising them to a solid 137 million.
Market researcher International Data Corp (IDC) raised its projection for global shipments of netbooks, to 11.4 million units for this year and 21.5 million next year. IDC analyst Bob O’Donnell thinks that the waning economy might actually have a beneficial impact on netbook sales as “buyers in emerging markets could be enticed by netbooks’ lower price, while those in developed markets could put off upgrading their notebooks and opt for a netbook.”