Netbooks: Not if, But What Will Replace PCs

Smart reader Cletus White responded to my post predicting that netbooks will replace many PCs with this comment:

"Netbook, yes maybe...but I read your blog from a facebook link and responded here on the couch via my apple iPod touch (home wifi). It's not a netbook . It's an Internet appliance about the size of a playing card."

He's right; it's not just netbooks but all sorts of devices which are replacing PCs in our lives. During the day my Blackberry (RIMM) is now my take-along email machine, not my much heavier Toughbook which used to be my constant companion. Blackberry's good integration with Exchange makes this practical since I can reply, delete, and folder from the Blackberry and not have to redo any of it when I go back to my desk. Sent mail ends up in my sent mail folder no matter where I read it from.

Since the Exchange Web Client which runs in a browser (officially Office Outlook Web Access) is now very good (formerly it was awful) and since I'm online so much of the time, I don't use the standalone Outlook client on my PC to do my State of Vermont email when I'm out of the office; I do it all in a browser window. That's great in an Internet café where I don't have my own machine. More important to the future, since I'm just working in a browser, I don't really need the PC; I could be on a netbook or some other connected device.

Web sites are developing mobile-friendly versions of themselves and the iPhone shows how even websites authored for PCs can be reasonably accessible on smaller screens. During our recent trip to Greece, we used Kindle's onboard dictionary for word disputes (in English) and Google Search (GOOG) and Wikipedia on Mary's connected iPhone (AAPL) for settling all other bets. Even if I had a cellular data plan for my PC on this trip (too complicated and expensive in Greece), using the iPhone was faster than booting up a computer; and, like a PC, the iPhone took advantage of WiFi in hotspots (We didn't get Skype working on it, though).

Perhaps a sign of times to come (and certainly partly a result of recession), Microsoft (MSFT) reported a 32% revenue decline in quarterly profits and the first ever decline in quarterly revenue since it went public twenty-three years ago. People aren't buying as many computers, of course; they're not upgrading as often. But this from the Wall Street Journal story on MSFT earnings:

"In addition to slumping PC sales, Microsoft faces a challenge from netbooks, the inexpensive laptop computers that are the only segment of the PC business enjoying growth. Microsoft hasn't been able to charge as much for the versions of Windows that are generally bundled with netbooks as it can for software included with other types of PCs."

Even worse for the future of Microsoft is that netbooks almost never come with Office and some, like the one I bought, don't have Windows on them at all.

Having learned from my prediction in 1984 that mainframes were on the verge of extinction, I know that PCs will be with us for years to come. But the future is a world where all sorts of appliances are used to get online and where applications and data usually live in the cloud with access through a browser. No one will consider it necessary to have a PC to go online. No one will be offline for very long.

Comments

[Tom B:]

MSFT is being bitten by the fact that 99% of Windows PC users do little more than read E-mail and prepare simple documents. It used to be that some were serious gamers, but they now use game consoles, largely.

In contrast, many Mac users do creative things with music, videos, etc. And, as you point out, if you want a REALLY small device that does what a netbook does (I would argue MORE), one can buy an iPhone/Touch.

Apr 27 08:55 AM

[top_tier:]

That's all well and good for those just using PC's for the net. Desktops will remain, or some iteration, simply because in a real world working environment you need robust applications and you need to see them large, scale matters. Netbooks are okay for the road warrior and anyone else that doesn't need much from a PC and that's about it. Even cloud computing is questionable, it has not been proven that people are willing to pay a monthly subscription, it hasn't worked well for music and I imagine there will be plenty that prefer their own apps on their own systems.

Apr 27 09:07 AM

[Larrysyr:]

It's clear that as computing power becomes smaller, cheaper and more powerful, it will be used in a much wider variety of ways than simply desktop PCs or 15-inch laptops. Apple is certainly pioneering new uses for PC alternatives, but I expect the field will continue to change, and new devices, uses, and competitors we haven't imagined will burst on the scene.

I work in an office and use a ton of spreadsheets and a PC with a 19 inch screen works really well for that setting. That market is mature. The newer, more mobile uses are where the growth will be. If history repeats itself, Apple will once again be the pioneering price leader, but competitors will figure out how to do similar things more cheaply.

Apr 27 10:13 AM

[IA.countryBoy:]

top tier said, " Netbooks are okay for the road warrior and anyone else that doesn't need much from a PC and that's about it.
True but that's where the big numbers are. both aunt Sally and niece Kim on facebook are getting tired of using big clumsey, too expensive, and problem filled machines that can do a thousand things they don't ever do
Yes, it was cool for a while to own a machine that has 100 times the computing power of the luner landing module but that luster is wearing thin, driven by the constant bugs and delays of software that is too busy doing things you didn't ask for to do what you really want.

Apr 27 10:41 AM

[vassar:]

The Facebook application on the iPhone works great. No need for a netbook or laptop (and the iPhone is a computer with much more power than the Lunar Landing module to boot!)

On Apr 27 10:41 AM IA.countryBoy wrote:

> Kim on facebook are getting tired of using big clumsey, too expensive,
> and problem filled machines that can do a thousand things they don't
> ever do

Apr 27 11:05 AM

[The Werewolf:]

Oh please. Do you really believe that more Apple users do 'creative' things than Windows users? Adobe sells more copies of Photoshop to Windows users than Mac uses even when you take into account the market shares.

The fact is that Windows reaches a far larger and more diverse range of people, and it's on low and high end computers - while MacOS is only on a relatively premium computer fhat means you get a highly skewed market, so yeah, you're comparing apples to oranges.


On Apr 27 08:55 AM Tom B wrote:

> MSFT is being bitten by the fact that 99% of Windows PC users do
> little more than read E-mail and prepare simple documents. It used
> to be that some were serious gamers, but they now use game consoles,
> largely.
>
> In contrast, many Mac users do creative things with music, videos,
> etc. And, as you point out, if you want a REALLY small device that
> does what a netbook does (I would argue MORE), one can buy an iPhone/Touch.

Apr 27 11:56 AM

[The Werewolf:]

I keep seeing this 'netbooks are ok for really basic things' argument.

Do any of you actually OWN one?

I own a first gen Aspire One, the most popular netbook on the planet. I can run pretty much any productivity application I have on it. Heck I can run Photoshop, Poser and StrataStudio on it quite well.

Small screen and small keyboard? Hi - it was designed to be ultraportable. I carry mine in a small shoulderbag. But when I need a big screen and a full sized keyboard (usually at home), I plug in an external monitor and USB keyboard. It can handle a 22" monitor no problem.

Is it a gaming computer? God no.

Is it a high end rendering system? Nope.

But is it good enough for almost everything else? You bet.

But is the iPhone? NO. I have one and after a few months, the limitations of this overhyped piece of bling finally have me desperate to get a serious smartphone (which will probably be an HTC Touch Diamond). The iPhone is great if you really don't do much on your phone, but as you try to move up to serious stuff, it quickly starts to become impossible to use.

Ironically, Tom B's comments are more accurate when applied to the iPhone than to Windows.

Apr 27 12:03 PM

[CGP:]

I trade stocks and do the Mr. Mom thing. At home I use a laptop with an attached 19" LCD 2nd screen which is helpful for trading, doing research, spreadsheets etc. I'm looking into smartphones (hopefully Palm Pre on Verizon) so I can do trades when I have a minute when out on errands or out with the kids. Many times I've missed good trade opportunities being away from my desk.

With a wireless handheld device I won't have to be tied to a desk (automated trades are a bit of a blunt instrument). By far the best situation is to have both options; at home for all the nitty gritty details and on the road when I basically know what I want to trade, I just need the appliance and access for execution.

Also remember, once the soon to be available TV airwaves are in play, portable wireless will explode onto a new level. Hopefully security issues can be addressed.

Apr 27 12:16 PM

[jack dee:]

As the power increases in low end netbooks, we will all forget the BS about "microsoft in trouble"
As the prices blur between high end noetbooks and low end notebooks we will have already forgotten these bland stories predicting huge changes based on a pile of pants.

MS will continue to do great, apple will continue to brand itself as the choice for cool kids with cash.

None of this is zero sum.

Apr 27 12:21 PM

[Orlando Ste...:]

While netbooks are hot, I already have a laptop and many like me may remain on the sidelines for lower cost 3/4G data services. The key now for netbook market to really open up is reduced communication services costs, not the gear.

Apr 27 01:07 PM

[Orlando Ste...:]

Yes- netbooks are hot and priced well even for folks like myself that already access to desktop(s) at home and have a work laptop to lug around.

The key cost trap is the additional, onerous locked in service costs for more flexible, mobile 3G/4G communication services. This service make devices like this so handy and represent a barrier for continued market growth until related overall consumer costs/prices drop further.

Apr 27 01:22 PM

[JamesApple:]

All electronic information processing have 2 modes of processing: local, and remote. Local processing needs more electricity and resources, remote need good telecommunicatons but connectivity is a must - not true if you are somewhere in the Afghan mountains or network dead spots.

True enough, 80% of the population needs only 20% of all functionalities, but 80% of that 20% functionalities need to be done with less than 20% of your available (tax return for example).

It's your life not your PC or Netbook's life. Applications run your life not the machines. iPhone applications are designed for running your life, instead of learning keywords, menus, shortcuts like the blackberry applications.

You train the iPhone to do your tasks for you, the blackberry applications train YOU to do its tasks instead. That's why people are still considering using netbooks, or blackberries.

Apr 27 01:24 PM

[jack dee:]

"these netbooks threaten its highly lucrative OS monopoly."

Look a small duck threatened me the other day,but no matter how much it quacked on, I still knew that at the end of the day it would only get in at best one or two pecks before I ate it.

Netbooks have already improved enough that this whole story is about over. Apart from really low end POS netbooks they can run WIN fine, and as they get better they will run it better and WIN7 is a cert to run on all of them.

At most we are talking about margins, not displacement.

I repeat the term "netbook" is just marketing for a small form factor low end lappy and nothing else.

Apr 27 01:46 PM

[Analyste de...:]

Its all about the demographics. Older users get older - they're content with what they have and actually expect 'easier & simplified' as they grow older. Younger consumers aren't buying those big clunky laptops and they're already enjoying the convenience of a handheld portable. Therefore, the next generation must be smaller & more portable - netbooks and smartphones ARE the future and it's here now. (The form & function of workstation 'Family' PCs won't change dramatically, but sales will decline accordingly.)

Tons of Asian students already have the ASUS eee devices in Boston - as they lead, we follow. The contrast is sharp, you still see cash-strapped Americans in their late-20s carrying around ancient laptops, but kids in college now won't be doing that in 5 years.

For similar demographic-economic reasons, we should see significant growth in prepaid mobile services & digital plans. Less Affluents & early adopters will continue to drive the market that way.

Apr 27 02:18 PM

[Tom B:]

The tiny fraction of Windows (compared to total Windows users) users using Photoshop are NOT the ones who will be buying Netbooks. They will be people who need to image process, but find themselves in all-Windows Enterprise work groups.


On Apr 27 11:56 AM The Werewolf wrote:

> Oh please. Do you really believe that more Apple users do 'creative'
> things than Windows users? Adobe sells more copies of Photoshop to
> Windows users than Mac uses even when you take into account the market
> shares.
>
> The fact is that Windows reaches a far larger and more diverse range
> of people, and it's on low and high end computers - while MacOS is
> only on a relatively premium computer fhat means you get a highly
> skewed market, so yeah, you're comparing apples to oranges.

Apr 27 03:42 PM

[JamesApple:]

Small screens like the cell phone are not fit for older folks who have problems using computers anyway.

Apr 27 04:05 PM

[drcott:]

I am single sided deaf and need a bone anchored hearing aid cell phone where sound is heard throughout the skull.If anyone knows where I can get one please let me know.

Apr 27 07:49 PM

[sett0047:]

I would suggest looking into the Microsoft Mobile capabilities in your phone purchase - if you currently use MS, your mobile will truly be an extension of your PC.


On Apr 27 12:03 PM The Werewolf wrote:

> I keep seeing this 'netbooks are ok for really basic things' argument.
>
>
> Do any of you actually OWN one?
>
> I own a first gen Aspire One, the most popular netbook on the planet.
> I can run pretty much any productivity application I have on it.
> Heck I can run Photoshop, Poser and StrataStudio on it quite well.
>
>
> Small screen and small keyboard? Hi - it was designed to be ultraportable.
> I carry mine in a small shoulderbag. But when I need a big screen
> and a full sized keyboard (usually at home), I plug in an external
> monitor and USB keyboard. It can handle a 22" monitor no problem.
>
>
> Is it a gaming computer? God no.
>
> Is it a high end rendering system? Nope.
>
> But is it good enough for almost everything else? You bet.
>
> But is the iPhone? NO. I have one and after a few months, the limitations
> of this overhyped piece of bling finally have me desperate to get
> a serious smartphone (which will probably be an HTC Touch Diamond).
> The iPhone is great if you really don't do much on your phone, but
> as you try to move up to serious stuff, it quickly starts to become
> impossible to use.
>
> Ironically, Tom B's comments are more accurate when applied to the
> iPhone than to Windows.

Apr 28 06:21 AM

[fredh:]

Microsoft is unfortunately so big and unwieldy it isn't able to respond quickly to these changes. I see MS unloading their unproductive divisions and shrinking markedly in the next 5 years.

May 05 10:12 PM