Hedged In's  Instablog

Here's the NY Times analysis of why Microsoft and Intel could be the biggest losers from netbooks (from Light and Cheap, Netbooks Are Poised to Reshape PC Industry):

An unexpected group of companies has emerged to help drive this transformation [to netbooks] — firms like Qualcomm, Freescale Semiconductor and Samsung Electronics, which make cheap, power-saving chips used in cellphones and are now applying that expertise to PCs.

As in any revolution, the current rulers of the kingdom — Intel and Microsoft, which make the chips and software that run most PCs — face an unprecedented challenge to their dominance. Microsoft is particularly vulnerable, since many of the new netbooks use Linux software instead of Windows.

“A broad shift in the consumer market toward low-cost PCs would clearly put pressure on the revenues of nearly every player in the value chain, from component suppliers to retailers,” wrote A. M. Sacconaghi, a securities analyst with Sanford C. Bernstein & Company, in a report last month. “However, we believe the impact would be especially negative for Intel and Microsoft, who today enjoy near monopoly positions in their respective markets.” 

...Most of the netbooks sold today run on an Intel chip called Atom, which is a lower-cost, lower-power version of the company’s standard laptop chips. And about 80 percent of netbooks run Windows XP, the older version of Microsoft’s flagship software.

The new breed of netbooks, built on cellphone innards, threatens to disrupt that oligopoly.

Based on an architecture called ARM, from ARM Holdings in Britain, cellphone chips consume far less power than Atom chips, and they combine many functions onto a single piece of silicon. At around $20, they cost computer makers less than an Atom chip with its associated components.

But the ARM chips come with a severe trade-off — they cannot run the major versions of Windows or its popular complementary software.

Netbook makers have turned to Linux, an open-source operating system that costs $3 instead of the $25 that Microsoft typically charges for Windows XP. They are also exploring the possibility of using the Android operating system from Google, originally designed for cellphones.

Quick comment: the article doesn't mention AMD, which is in an even worse position than Intel. It has no processor to compete with Atom, and it's also threatened by the ARM chips.