Cheap netbook sales bringing down laptop revenues, no brainers require no brains
By Laura June 
posted October 11th 2009 7:21AM
posted October 11th 2009 7:21AM
posted October 11th 2009 7:21AM
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Well I hear you talking about margins but the article just said the netbook market grew 264% while laptops shrunk 5%. In this case, actual sales growth > margins.
@upgeog,
Who cares about sales growth? Look it doesn't matter if they sell 1 or 1million of these, they still make nearly zero on them. In fact, the more they sell, the worse off they are since they are undoubtedly cannibalizing higher margin machines. There is a reason Apple refuses to make one of these, profits. And judging by Apple's earnings vs. the rest of the PC industry, they are right.
To be clear though, I love the concept of a netbook, especially a 10" model. I would like a little more power out of them, but I think that is coming shortly, and when it does I will likely get one. I just think the PC industry has shot themselves in the foot with this race to bottom. They will have to make up for the lost margin somehow, and it will likely come at the cost of quality in the components, over-all product and support.
I understand your point. But sales growth vs. margins is not an "either or" because sales growth for netbooks are the conditions now. They are what is going on right now. Even if manufacturers wanted netbooks to die a happy death, they won't remove them because numbers tell them that the market is changing. So they have to adapt and that is what they are doing. Better sell a netbook for almost zero profit margins rather than standing their ground and lose laptops sales over netbooks (and lose even more money) because they don't happen to offer one.
The laptops makers have their own market trend analytics whatever... They know what is going on.
@Cashmonee
Hate to be the one to break it to you.. But there is a simple truth that you are missing.
We do not exist to keep the computer industry in operation. The world does not work like that.
So if Dell loses money.. too bad. Someone else will be able to offer a similar product to those who want it. Unless you are suggesting that nobody actually needs fast modern computers.. In which case, the computer industry is in for a hard time once everybody finds out, and you have been ripped off for years. So why are you trying to defend them?
Companies produce products to sell. People buy them if they appeal. Not to keep the company in profit. People do not buy what they do not want. Despite what the advertising industry says.
Near zero profits are not zero profits, or negative profits. They are profits. And the minimal margins you talk of are not pennies per unit.
At the end of the month, if Dell sells a million PCs at a $20 profit. they make $20 million.
If they sell 2 million at $10 profit, they still make $20 million.
As far as profitability goes. The figure that is important is the amount of profit. Not unit sales. See how it works? Profit is selling price minus all costs. Even though they have halved their profit margin. Thinking of it as profit per individual unit is misleading and leads to an inaccurate conclusion.
And if unit sales overall go up, Dell makes more profit. But unlike the armchair prophets of doom, Dell knows that the same rise in unit sales would not have happened without the netbooks being around, so the amount more expensive units that they might have sold is irrelevant.
Dell also sells at several different price points. Re the cheaper ones sold at a loss? Hell no. Even the discounts still make a profit. And are a good way to get old stock out of the warehouse where they are depreciating and costing money to store.
An extra million sales is the profit from that extra million sales, not the loss from not selling the more expensive units instead.
you guys who say that this is obvious are wrong and have probably not taken a microeconomics course! There is something called price elasticity of demand. What this means is that for some goods, if the price goes down more people will buy them and then total revenue will go up! So, if laptop sales were elastic, more people would buy them now that they're relatively cheaper, and total revenue would go up. What we've found out is that laptop sales are inelastic, and that price changes haven't increased demand as much as they've lowered revenue.
http://en.wikipedia.org/wiki/Total_revenue_test
Thank you netbooks for changing the whole standard price of today's PCs and laptops :)
Oh and thank you Zune HD and iPod touch for changing the standard price for touchscreen MP4 players.
The only thing thats's still expensive are SDDs, lol
This is ordinary as time passes by.
I bought an EEE 701 years ago for $400. Last year I got a eee 901 xp for $250 (USD). I recently doubled the ram on the 701 for $25. I added a $50 320g Passport to the mix, and now I'm very happy. The Linux based 701 has never given me any trouble. I bricked them both, by having them on chargers during a thunderstorm, My fault, I know. Hit the reset button on them both, full recovery (thanks to full backups on the Passport). I see a lot of Apple folks (not hating) slag the netbooks as being too simple, isn't that your whole argument for buying from Steve Jobs? I have yet to plug a periph into the Linux machine and have it NOT recognise it. Even my old iPod 8g Nano shook hands and made friends. I'd rather have a low cost rig that does what i, as the owner , says than a high cost Diva machine that bitches and makes me beg. But that's just me...........
What OS are you running? EEE-Xandros is not all Linux has to offer.
A more welcome comment would be "why not hackintosh your netbook?" The "I think"-bit is great.
I don't agree this is bad news either. The PC platform, and much more importantly, the OS, are living on in a newer format. Higher-end hardware is there for those who want it, as is lower-end cheaper stuff for other needs.
Why netbooks? Try opening a regular laptop on a commercial airliner if you're in coach class...that's why I bought my netbook. I use a corporate laptop for travel, but with the VPN and other corporate required software on it, my "underpowered" netbook runs circles around it. It boots 10 times faster, has adequate storage with a 160gb hdd, plus bumped RAM of 2GB. It does everything I need it to do and I have far less problems connecting to wireless networks when I travel than with the corporate laptop. I don't have an external DVD drive, but I have managed well without it. A 16gb thumb drive goes a long way these days. Battery life and weight are also a huge plus. Would I consider upgrading to another netbook? Absolutely. Will I upgrade the OS to Windows 7? Maybe...we'll see based on the early reports of Windows 7's success/failure in real life. I wouldn't but based on just the hype - just like I waited for some time before i bought a netbook.
wont be long till smart phones catch up with netbooks... pocketbooks lulz
two points
1. not everyone needs a computer that can do everything. they just need email, some light web browsing and maybe some AIM. So a netbook, when it really is a netbook and not an ultraportable calling itself a netbook to be cool, is what is in order. be it a business man that wants to stay in touch with home and the office, granny who wants to be in touch with the kids 4 states over or whatever.
2. I'm far from an Apple fanboy but really, anyone that thinks that Jobs and pals would spend 5+ years to develop an ebook reader is smoking some serious Jamaican Red with a side of Crack. What we are more likely to get is an extra large ipod touch with 3g data, multitouch etc. the whole ebook reader would just be one more built in app to attract folks -- look it's a game player, a media player, a netbook and an ebook reader. 4 devices in one. yipee, give us your money. hell if I might actually wait and get one if that's what it is cause that's a device I could use. Especially if they can give it a decent battery so I can take it on sets with me and not have it dead in two hours
Can it run Crysis? C'mon, netbooks are trash.
What gives guys? This is not information at all. The price of computing has been steadily dropping for as long as I can remember. Long before anyone cared to know what a netbook is and long before the iPhone.
The netbook didn't magically appear out of thin air to be the sole claim to victory. So why are people giving it so much credit? I'm sure I haven't been living on Mars in the past decade..... because the price of computing has ALWAYS been dropping and even an alien could have seen this from outer space! Wasn't ET the one who phoned home over two decades ago?
Practically all technology has been dropping in price -- from cellphones to big screen TVs, ET's finger, camcorders, high-rez cameras, Alieware, HD compatibility, CPUs, GPUs, hard drives, gaming consoles, DVD players, Blu-Ray, blank media, SSDs, RAM, memory, calculators, supercomputing, etc. etc. etc. etc. All of it has consistently gone down in cost. This is nothing new. The netbook didn't cause this but is merely a product of a trend long before it. And laptops probably would be cheaper today if netbooks weren't around.
I just bought a 42" Dynex that runs a gorgeous 1080p for only $549 at Best Buy.... which is an insane deal and there's no chance in hell that I would be foolish enough to give credit to a tiny 10 inch 'netbook' for such an awesome price. It's a natural cycle. If anyone should be thanked for the rapid decline in computing prices, then it's the psycho, rabid gamers who have demanded every inch and frame from their latest Doom-clone rig. These nerdy players are the Gods of the pricing industry and, for it, we probably owe them our lives! No, netbooks can not run Crysis yet. But they will eventually thanks to the crazy demands of these elite, nutty gamers! They are the people we should be thanking. Graphics (whether HD, CGI, gaming, videoediting, etc.) have always been the cornerstone of cheaper computing.
Heck, given the trend, it is actually netbooks that are overpriced at the moment since laptop prices have eclipsed them. Laptops have long hovered around the $500 mark for quite some time now -- at least three years. And we are acting surprised to see laptops available at $279 now? Jesus guys.... Wake up! Netbooks didn't cause this. If anything, netbooks continue to charge the all-too-familiar premium for portability (which is an inflated bubble that is bound to burst again).
Newegg recently had a 1.5 TB hard drive on sale for a mere $99 (free s/h). And it has nothing to do with a netbook with respect to how this massive amount of storage would have costed a lot more just four years ago. Netbooks did not cause this -- graphics did.
Credit should be given where it is due. --- Thank the elite gamers. --- ...the ones who wipe their read ends with greenbacks and replace their custom rigs every six months. Because we're all feeding off like rats on the 'trash' that they throw out!
The gaming disease has no end in sigh, fortunately!
And "Can it play Doom?" is a question that will be asked for eternity.
Go Consumers!