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Smaller PCs Cause Worry for Industry
source: New York Times


The HP 2133 Mini-Note PC
source: New York Times



It is a market that caught the major computer companies -- both hardware and software -- by surprise after Asus, entered the market last year with the $300 Eee PC. The company thought the device would essentially appeal to the education market, or as a starter laptop for adolescents, but the interest has turned out to be broader.

With an emphasis not in on-board applications (like word processing), but Internet-based ones like Google Docs, the Linux-based Eee PC sold out its 350,000 global inventory. It has been in short supply ever since, said Jackie Hsu, president of the American division of Asus. Everex has sold around 20,000 of its CloudBook, which sells for about $350.

The sales are a veritable drop in the bucket compared with the 271 million desktop and laptop PCs shipped globally last year. But there is an intensifying debate about how big the category can become, and what segment of the market finds these computers appealing.

IDC, a market research firm, is predicting that the category could grow from fewer than 500,000 in 2007 to nine million in 2012 as the market for second computers expands in developed economies.

Intel is projecting that by 2011, the market for the netbooks will be 40 million units a year, which is why Intel is jumping in with low-powered chips that would be used in the netbooks and the net-tops.

With its new Atom chip, Intel is competing against upstarts including Via, a Taiwanese company that has a chip called the C7. The C7 is showing up in netbooks and, indeed, is being used in the Everex models and in H.P.'s $500 Mini-Note.

William Calder, an Intel spokesman, said that the cost of the Atom for PC makers is around $44, compared with $100 for a state-of-the-art chip. He said that Intel executives think the market for low-cost PCs is too big to pass up, though it does raise a potential threat to more powerful and more profitable computing lines.

Microsoft has been a reluctant participant too. Even though it is no longer selling its Windows XP operating system software, it made an exception for makers of these low-cost laptops and desktops. Microsoft said it was responding to a groundswell of consumer interest in the low-cost machines, but some makers of those machines say Microsoft did so reluctantly because it did not want to lose market share to Linux.

Tim Bajarin, an industry analyst with Creative Strategies, a technology consulting firm, said that while the big computer companies have been caught off guard by the market's potential, they are finding little choice but to dive in.

"H.P., Dell and these other PC makers have learned that if there's consumer interest, you can't just sit back and let someone else steal all the thunder," he said.

Hewlett-Packard thinks consumers want more than a mobile Internet terminal. "Our competitors proved there is a pretty good market," Robert Baker, a notebook product manager at Hewlett-Packard conceded.

Dell has not been specific about the price or features of its entry, but Michael Tatelman, vice president for marketing at Dell, said he believed that the category would have limited consumer appeal.

They are useful for someone on the go at an airport or on a commuting trip on a bus, but not for a more intense computing experience, he said. "It's a good 30- to 90-minute experience."


   







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