Netbooks Bruise Notebooks, Netdevices Get HD, PCs in Trouble

Netbooks have become a thorn in the side of the very PC industry that makes and ships them, because of their growing unit dominance and the resulting shrinking revenue stream. Now new chips from Broadcom and Nvidia will expand their media capabilities into HD video, further putting a hurt on traditional laptops as well as portable DVD players. And I'm suggesting a new category -- netdevices -- that would also take into account tablets, Internet-enabled e-book readers, smartphones, and other bits of powerful portable computing

To see the just the beginning of the impact that netdevices are having on the market, look at these tables from DisplaySearch that show the sales of netbooks compared to traditional laptops and notebooks:

Mini-Notes are DisplaySearch's term for netbooks, and they have a rate of unit growth that is impressive, even for the high tech industry. They're already hovering around 20 percent of total unit sales this year and, if DisplaySearch is right, will cross that boundary in 2010. And that is bloodying the vendors, because the prices are low, meaning that the netbook growth comes at the financial expense of other the portable PC category as a whole.

The estimate for 2010 could be too low, because new chips from Broadcom and Nvidia will bring playback of HD video, both 720p and 1080p resolutions, to the tiny and light units. Although units will be introduced only in January at the Consumer Electronics Show, and by no means will all netbooks have the chips, forcing consumers to ask, this is a significant ability, given what many people want to do when traveling.

However, I'm now starting to think that this division of machine category is becoming too artificial. Given the current capabilities of smartphones (Apple and RIM together have sold 100 million units since 2007 alone), new Internet-enabled e-book readers, upcoming tablets, and heaven knows what else coming down the pike, it's time to move into a broader category that I'd call a netdevice. This is anything that is Internet-capable and that can run some degree of software natively. Yup, a really broad definition, but I think it's one that is starting to make sense, because the cross-over capabilities are expansive enough now that one device might make do for another, depending on the consumer's needs.

The total gets pretty big, pretty fast. Again, looking at the iPhone and BlackBerry alone, about 51.4 million units have flown off the shelves in about the last 12 months, and this quarter is likely to see probably 21 to 22 million at least between the two companies. Add in other smartphones and the netdevice category is already up around netbook PC unit sales levels. This is only going to continue, putting additional pressure on traditional portable PC unit sales and even unit gross margins. That means continued weakening of such companies as HP, Dell, and Microsoft. It's a new market world, and not necessarily a pleasant view for many high tech giants. Given the rate of change, we might even see that the absolute dominant forces in high tech move away from the Windows-centric companies to Apple, RIM, Google, Sony, Acer, and Amazon.