Original Web Article: Acer Q2 results show risks of cheap netbooks
Review Summary:
The trend towards Netbooks will continue to accelerate and prices will remain low relative to traditional PC desktops and notebooks. Margins will improve and sales of accessory devices will increase. Microsoft (NASDAQ:MSFT) is betting the farm on this becoming a reality. Netbooks are Microsoft’s vehicle for driving sales of Windows 7 and Office 10.
Review/Analysis:
Sales of Netbooks would be accelerating much faster, except Microsoft put the brakes on Netbook sales in June. OEMs were selling Netbooks with XP and a hybrid drive environment, a Solid State Drive (SSD) and a Hard Drive (HD). It made a lot of sense by giving the Netbook faster startup using the SSD and then the rest of the OS on the HD. But, Microsoft outlawed this in June and allows XP on Netbooks only with up to a 16GB SSD OR up to a 160GB HD. NOT BOTH. This made the Netbook either a portable access device with minimal storage or unacceptable performance for many applications.
Microsoft understands how the Netbook will transform the computing world. The concept of a ‘network device’ with minimal built in capability has been around for years. What is new, is the ability to actually deliver one that meets the needs of business customers and not just consumers. Microsoft didn’t want the Netbook to become too pervasive unless they could drive a completely new experience with it.
Coincidentally, Windows 7 is designed to run optimally from SSD. It is also more touch oriented, versus keyboard oriented, than XP. In short, Windows 7 is designed to maximize a Netbook environment running on lower power processors.
What about running business applications? Like Word? Excel? Check out Microsoft Office 10. Web based. Full featured. Very similar user interface to existing Office platforms. Perfect for a lower power, portable access device like a Netbook.
What about other applications like Customer Resource Management and ERP? Check out what Oracle (NASDAQ:ORCL) is trying to deliver with their Fusion products. Or, solutions from companies like Epicor (NASDAQ:EPIC). Again, perfect for Netbooks.
What about security? Netbooks are the dream of every Chief Security Officer on the planet. No data stored on the local Netbook. Add a biometric logon feature and you have a virtually impenetrable access device. Why slow down the universe with layers of antivirus, antispyware and other monitoring layers?
IT departments will love Netbooks. No applications on the end device. All web based definitions. Replacing failing devices is a breeze. Retraining for hardware upgrades becomes nonexistent. Upgrade costs are drastically reduced. Pay per use applications.
Data center’s are consolidating and outsourcing. With virtualization, inline deduplication of data and many other new technologies, the ‘cloud’ is now totally possible with a superb ROI.
Netbooks will quickly become the replacement form factor for large and small enterprises. Competition will keep prices low and features up. Look for the resulting decrease in IT expenditures on notebooks/desktops. CAPEX will shift internally to data center and infrastructure.
Will Netbooks make the OEMs rich? No. Will OEMS, like HP (NYSE:HPQ), that have large data center product bases benefit? Absolutely. Do Netbooks create tremendous opportunities for third party products, devices and software? Absolutely. Especially those with ‘good enough’ offerings that allow penetration into the small to medium enterprise space.
President, Innovate the Future, Inc.
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David Croslin consults on this and many other topics through Gerson Lehrman Group. Please click here to contact David Croslin.