Netbooks - squeezed in the market by more powerful laptops

[internet news] Netbooks, those ultralight, basic notebooks that can easily fit in a backpack and perform basic computing tasks, doubled in unit sales and saw a 72 percent jump in dollar sales over 2008 figures, according to a report released today by DisplaySearch, a subsidiary of NPD Group.

DisplaySearch puts 2009 netbook revenues at $11.4 billion, a 72 percent jump from 2008's $6.65 billion, while units shipped grew even faster. This year, DisplaySearch projects 33.3 million units were sold, 103 percent better than the 16.4 million sold in 2008. That's close to ABI Research's earlier projection of 35 million sold. The gap between units and dollars reflects pricing pressure due to increased competition.

Not surprisingly, this came at the expense of laptops. Notebook sales as a whole rose only five percent this year, and that comes from lumping in netbooks with other groups. Ultraportable sales fell 23 percent in 2009, regular notebooks were down 13 percent, and desktop replacement notebooks fell 12 percent.

"To a degree, consumers bought netbooks as cheaper alternatives to notebooks," said John Jacobs, director of notebook research at DisplaySearch. "I wouldn't say they made up the majority of sales, though. I would say there are people saying I got a desktop, I want a laptop but I don't want to spend a lot."

But it looks like change is afoot for the coming year. For 2010, DisplaySearch projects notebook sales to accelerate to 16 percent year-over-year growth while netbooks slow to just 19 percent growth.

The largest growth segment will be desktop replacement PCs, which the company projects will jump 21 percent year-over-year in 2010. This will likely come from replacement of aging systems.

Jacobs said netbooks will slow due to a combination of factors: saturation, the uptick in notebooks, and being squeezed on both sides, by notebooks on the higher end and smart phones on the low end. People buying netbooks for the most part bought them as second or third PCs, so that market has matured quickly.

"Those folks buying netbooks instead of notebooks will return to their former buying behaviors. The evidence we have is a lot of people are buying these as secondary devices. So the number of people buying these as an alternative is pretty low," he said. "I think a fair number of consumers will pick a laptop over a netbook."

Ultra-portable notebook PCs are expected to show strong growth thanks to new 11.6-inch and 12.0-inch products built on ultra low voltage (ULV) platforms and with aggressive, sub-$500 average selling prices. These will put the squeeze on netbooks on the high end.

The low prices of netbooks makes them appealing as secondary PCs and that is not likely to change, at least in mature markets like the U.S., DisplaySearch notes. The company also thinks sales will start to grow in emerging markets and become more attractive to wireless service providers that hope to add to their revenue by offering subsidized mini-notes with data plan contracts.

Netbook Sales to Cool Off in 2010?