PC biz headed for a wireless shakeup
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| A sign of things to come? In its Atlanta stores, AT&T is selling the Acer Aspire One for $49 with a 2-year wireless data plan and DSL signup. Image: Acer |
PC retail is in rough shape again, and it's about to get rougher.
Evidence of hardship is everywhere. Hewett-Packard (HPQ), the world's largest computer maker, says it's selling about the same number of computers as a year ago, but getting a lot less money for them – sales dropped 19% in the most recent quarter. When Apple (AAPL) reports earnings in July, analysts expect Mac sales to be off as well. And while Intel (INTC) says it's hopeful that its chip sales are bottoming out, chip revenues are lower than they have been in years.
Why are things so bad? The easy answer is that PCs cost hundreds of dollars, and consumers don't have a lot of extra cash floating around these days. Unless your computer has been struck by lightning and given up the ghost, chances are you're holding off on purchasing a new one. One tech industry executive recently confided to me that it's not just U.S. consumers thinking this way – the entire global PC market headed off a cliff at roughly the same time late last year, forcing computer makers to cut workers and rethink their strategies.
In the midst of all that, wireless carriers are poised to shake up PC retail. AT&T (T) announced this week that beginning this summer, it will begin selling small, low-cost Windows XP netbooks from Acer, Dell (DELL), LG and Lenovo in all 2,200 of its U.S. stores. (In case you're counting, that's about twice as many locations as Best Buy (BBY) has.) Rival Verizon (VZ) has already begun selling an HP netbook.
Why buy a computer from a phone company? Price, of course. Sign a two-year wireless data contract with AT&T, for example, and you get $50 knocked off the price of a netbook. Get home DSL service too and save $100. In Atlanta, where AT&T has been testing the deals, the cheapest Acer netbook sells for $49 after rebates.
Sales there have been brisk enough that AT&T execs are confident that cheap laptops will lure customers nationwide the same way cheap phones have in the past. And the deals will only get better: It's easy to imagine that in a year or two, customers who sign up for two years of voice and data service (at a cost north of $100 per month) will leave a store with both a "free" phone and a "free" computer. Exciting, huh?
While this is great news for netbook-loving consumers, it's a downright scary prospect for PC makers. If the phone business is any guide, carriers will fuel demand for the cheapest and least profitable computers out there, and put pressure on traditional PC stores to sell low-price PCs. And that will force tech companies to work harder to lure shoppers toward more powerful (and more expensive) hardware.
That's not an impossible upsell, as the iPhone and BlackBerry (RIMM) have proven in the phone business. But it's yet another challenge the PC gang doesn't exactly need right now.
I work for an .edu and I have to say that I think netbooks will not only catch on, but will easily grow into their own segment, needing all the support for the user community that can be provided.
Will it be a primary computer? I hope the answer is "no". But the netbook as a concept cannot be beat for portability and on the fly work if needed.
When you consider that most people only do 5-6 things with a computer, this is a perfect solution for plane travelers, coffee house flies, and others who only need the minimum when they are on the go.
Just to clarify, I consider those 5-6 things to be:
Web surfing
Games
Document writing
Printing
Music and movie storage and management
These simply tasks can be easily handled by a netbook. Not having an onboard optical drive, is not that big of a deal if people stop to look at how often they really need one.
The netbook also has a future for public school systems that have wanted to put computers in the hands of it's pupils, but have not been able to afford even the cheapest of laptops.
Let's see. You get a "free" computer from the phone company in exchange for paying them $100/month. It comes with a 3 year old brain (CPU) and operating system. You download $1,000 worth of music and movies from iTunes during your first year of ownership. Then you buy a few applications, say to edit photos or play games and find it's slower then the computer you just replaced. Doesn't seem like such a deal to me…
Almost forgot. I wonder what kind of impact this will have on landfills, etc. I've seen how disposable and discarded "free" cellphones end being trashed for the newest flavor of phone. I hope these companies are prepared for the impact and cleanup they will be RESPONSIBLE for in 5-10 yrs of dirt cheap laptops….better hope they are trully green.
This is great for non-tech savvy peoples looking for their first pc to get connected. A net book is just a large smart phone IMHO. No where near as powerful and functional as a laptop and home pc. If anything, you will get milked for much more from the "netbook" people for added functionality that in the long run is far more costly than a real laptopl
This can't be that great. So you get a free netbook that retails for $200-$300 but you have to pay $100+ a month for the service. Its great if you wanted wireless internet from the wireless telcos but outside of that its not a great deal.
Netbooks are selling – and the line between high end phone and low end computer is only likely to get blurrier. Further, TVs and PCs are likely to merge – and TV networks will scramble as it becomes easier and cheaper for anyone to originate and broadcast shows to a wide audience without benefit of help from the networks. But this all doesn't spell bad news for PC makers, as the author suggests. It's simply an expanded role for the computer. There will always be a role for the full sized laptop – typing business reports, spreadsheets, database work, and yes, movies and gaming are not likely to migrate down to the smart phone level soon. PC makers ARE going to have to adapt to an increasingly commoditized market, with lower margins, and are going to have to pump up volume, particularly in regions like APAC, Latin America, and Africa, in order to continue growth. But whole new market segments are opening, and he who captures them, wins.
People who were attracted to the laptops purely because of their mobility will move to the netbooks, But people who need more than just mobility will still invest in the higher end laptops. Gamers, Software Developers & photographers are some of the groups that will probably never buy netbooks.