It seems everyone is missing the biggest negative for netbooks, margins. These companies make next to nothing on their computers as it is, and netbooks create even less profit. The fear for me is that these netbooks will force manufacturers to skimp even more on parts, support, etc. I like the idea of a netbook, but they still are not there power-wise (though maybe the next gen will be) and the low cost leaves me concerned about the viability of some of these companies and what they will have to do to make ends meet. For example, in the 90's Dell had second-to-none support. 10 years later, their support is absolutely terrible from outsourcing and cuts to make up for ever-shrinking margins on their products.
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.
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.
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It seems everyone is missing the biggest negative for netbooks, margins. These companies make next to nothing on their computers as it is, and netbooks create even less profit. The fear for me is that these netbooks will force manufacturers to skimp even more on parts, support, etc. I like the idea of a netbook, but they still are not there power-wise (though maybe the next gen will be) and the low cost leaves me concerned about the viability of some of these companies and what they will have to do to make ends meet. For example, in the 90's Dell had second-to-none support. 10 years later, their support is absolutely terrible from outsourcing and cuts to make up for ever-shrinking margins on their products.
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.