Netbook Scoop

The netbook market is hot.  All of the major players are looking to maximize their opportunities in the netbook market niche.

Here is how things are shaping up.

CPUs and Graphics Accelerators

Intel is currently in the driver’s seat with a near monopoly on netbook CPUs and integrated graphics processors.  They plan to merge these two separate chips into a single CPU chip in their next processor.

AMD missed the entire event when the netbook train left the station.  After spending a long period in denial when they publicly bashed netbooks and demonstrated to the world that they just did not get it, AMD recently introduced a Neo processor that is just beginning to be deployed in netbooks. So far, Neo gets poor marks on battery life.

Nvidia, who makes excellent graphics acceleration chips, is the odd-man out in this scenario.  Intel is integrating its own graphics accelerator into their CPUs.  AMD owns ATI (who is Nvidia biggest competitor) and is pushing AMD/ATI solutions whenever possible.  So, in order to stay competitive, Nvidia is building their own CPU for netbooks, called Tegra.

Operating Systems

Microsoft currently owns a near monopoly on netbook operating systems.  However, Microsoft has accomplished this by licensing Windows XP for nearly nothing for netbooks.

Microsoft wants to retire XP and move netbooks to the soon-to-be-introduced Windows 7.  They are still trying to develop a scheme to increase licensing fees for netbooks.  It appears that they will offer a somewhat crippled version of Windows 7 for netbooks – and entice netbook purchasers to upgrade.

Microsoft’s other strategy will be to severely limit the hardware on which the Netbook version of Windows 7 can be licensed.  This will force netbook makers to ship new models with more expensive versions of Windows 7.

Microsoft has to do the above very delicately, since Linux is laying in wait for an opportunity to find a toe-hold.  Many people think of Linux as something cobbled together by a bunch of hackers sitting in the pajamas coding in their basements at night.  In reality, the development is performed by some of the best programmers in the world funded by Microsoft’s competitors.

While we have seen several distributions of Linux on netbooks (Xandros, Linpus and Ubuntu) so far, none of these have captivated users and developed any significant market share.  But things may be changing.

Back in 2007, Intel, who has classically been a Microsoft partner, launched a version of a Linux operating system called Moblin (short for Mobile Linux).  In April, Intel turned over Moblin development to the Linux Foundation.  But Intel still actively funds development along with others.

While Moblin is still in the beta test phase, it has gained a lot of interest.  Moblin has been optimized for netbooks running Intel Atom processors.  It runs fast and it looks really slick.  Could this be the netbook OS of the future?

Meanwhile, Google has been hard at work on Android, which is a Linux-based operating system designed for cell phones, but already ported to larger devices like netbooks.  There is a lot of speculation that Android will become the netbook operating system of choice.

Wireless Carriers

The wireless carriers see netbooks as the next step up from smartphones.  In a manner similar to how carriers subsidize cell phones, carriers are beginning to offer netbooks at bargain prices when you sign a two-year agreement.

But, word is that the carriers don’t like the current arrangements with Dell, HP, et al.  So they plan to have netbooks manufactured to their specs and private-labeled.  This will drive prices down and put more dollars into the carrier’s pockets.

Don’t expect the current netbook makers to yield market share without a fight.

Laptop Makers

The popularity of netbooks surprised many of the laptop manufacturers.  Asus, Acer and MSI rode the netbook wave to significant market share increases.  HP, Dell and Lenovo jumped on late and saved some market share.  Toshiba and Fujitsu missed the bus and got left behind.

For the most part, these netbooks have been virtual clones containing a 9 or 10-inch display, an Intel Atom N270 processor, integrated Intel GMA 950 graphics accelerator, a hard drive, 802.11b/g Wifi, 1.3 megapixel webcam and Windows XP.

Look for these manufacturers all to strive to differentiate their products by changing up the feature set.  Expect bigger displays, different CPUs and different graphics processors, larger hard drives, more RAM, bigger batteries and sexier packaging.

There will be competition at the low end.  Expect prices for the value netbooks to drop to around $250 or below.

But many of the classic laptop manufacturers long for the bigger margins of yesteryear and will attempt to move the price points up.  Expect to see netbooks prices everywhere from $250 to $1000.

Summary

How will this all play out?

My guesses:

The netbook niche will split.

On the low end, where price is king, expect smartphones to evolve into small netbooks with ARM-based processors providing long battery life.  These will run some version of Linux.  They will be sold as devices used soley to access the Internet – not as PCs.

Then there will be netbooks sold as PCs.  There will be a wide range of products with lots of configuration options.  I expect the average price to be around $400.  This will be where the greatest share of netbooks will be sold.  Microsoft Windows 7 will be the operating system of choice for these netbooks.

But if Microsoft gets greedy with licensing fees, don’t be surprised if Linux finds some support at the low end of the market.  After all, an extra $30 represents a 10% price increase on a $300 netbook.

You should also expect to see a number of netbooks to be offered with prices in the $500-$1000 range.  While there will be some sales, I don’t believe that these will attract any significant share of the market.

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So that’s how I see it.  What do you think?  Let me know if you agree.  If you think I’m all wrong, then tell me how you see things playing out.

In any event, things happen fast in the netbook world, and tt should be fun to watch.