Netbook Sales: Cannibalizing Notebooks or Incremental?

by: Mick Weinstein

Is the small form factor netbook an evolution of the notebook computer - or a new product entirely? Here's an interesting moment from Intel's 4Q08 earnings conference call last night, addressing the issue, along with an explanation of notebook vs. PC supply chain (emphasis added):

Glen Yeung - Citigroup

Thanks. I guess I first wanted to just look at the notebook in the fourth quarter that you have just pointed. It was down considerably in your numbers, and yet, when I think about the end market, it wasn't down that much. I wonder if you could address how much of that notebook reduction you guys saw was a function of inventory decline and how much of it you think was cannibalization from netbook.

Paul Otellini - Intel President and CEO

I think very little of it was cannibalization from netbook, Glen. And we've done surveys now of buyers to try to triangulate on that. And while there is some cannibalization, the data suggests that the vast majority of netbook sales are incremental, and by the time we get to the analyst meeting, we'll share that data with you.

On the notebook side, I think what you see is that it takes longer to slow it down. Much of our desktop business is through the channel, which is the configured to order model. And so the channel adapts very rapidly. They have little inventories to begin with. It adapts very rapidly to demand changes, and in fact, if anything, our channel inventories and desktop products are a little light right now as channel sales stabilize in the second half of December.

Notebooks for the most part are assembled in China and Taiwan and then shipped, most recently, in the last six months or so, on boats. So the supply line actually lengthened as people fought to save money on shipping as the air transit prices went up with the gas going up. So, that all started to contract.

And I think that there probably was more inventory contraction in classic notebooks than in desktops as a result. And we'll know a little bit more as we go into the quarter, but that seems to be the picture.

You can find out what all companies are saying about netbooks - or anything else - with a search across earnings call transcripts from our transcripts center.

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