CES-Netbooks take center stage at trade show

LAS VEGAS Sun Jan 11, 2009 12:55pm EST

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LAS VEGAS Jan 11 (Reuters) - Netbooks were everywhere and on everyone's lips at the Consumer Electronics Show in Las Vegas, expanding as a category of small laptop PCs that are rewriting the rules for the struggling computer industry.

While nearly every major PC makers had a new netbook on display at the four-day show ending on Sunday, no two companies seemed to agree on what the rules are to define this segment of tiny, ultra-portable notebooks.

Some netbooks are stripped-down PCs optimized for Internet use and costing a relatively affordable $300-$400. But others are fancier, like Sony Corp's (6758.T) $900, 8-inch device with all the bells and whistles of full-sized notebooks.

It is early enough in the game -- netbooks did not take off until last year -- that their ultimate place in the PC universe is still unknown. If netbooks are, as many PC companies hope, a companion product to a traditional laptop or desktop computer, then they have discovered a new avenue to grow sales.

If, however, netbooks are replacement laptops, then they would eat into the notebook market in a substantial way and pinch the margins of PC makers.

Forrester analyst J.P. Gownder calls netbooks the "third form factor in the consumer PC space, in addition to laptops and desktops" and said in a research report that companies should emphasize them as a complementary product.

Phil McKinney, chief technology officer for Hewlett-Packard Co's (HPQ.N) personal systems group, said the company continues to view netbooks as a companion device. "We kind of look at the minis as what we call a tweener product," he said.

What is certain is that netbooks are one of the few bright spots for PC makers being punished by reduced IT spending and falling consumer demand due to the global economic slowdown.

CES [ID:nN05368327] saw big names such as HP, Dell Inc DELL.O, and Sony introduce new pint-sized models. Meanwhile, netbook pioneer Asustek (2357.TW) showed off flashy innovations on its line-up of netbooks, including a tablet model.

DEFINITION OF NETBOOK CHANGING

As originally conceived, netbooks were small, lightweight, commodity PCs that offered consumers the ability to do simple tasks such as Web-surfing, email and chat at a very attractive price below that of a budget standard laptop.

The first netbooks to strike a chord with consumers were models from Asustek and fellow Taiwanese PC maker Acer Inc (2353.TW). The two companies still hold a commanding share of the market, according to research firm DisplaySearch.

But with the bigger PC players now in the netbook game, the market should get more competitive. Dell's and HP's models are generally a little pricier, but still quite affordable.

Toshiba Corp (6502.T) is also preparing to bring a netbook to the U.S. market, said Carl Pinto, vice president of marketing for digital products at Toshiba America.

He conceded that netbooks do eat into the notebook segment, but dismissed the reality. "Even if there's some cannibalization, it's still complementary," he said.

Asustek Chairman Jonney Shih said he sees a netbook cannibalization rate of around 10 percent, but said they are the key to his company's future: "Those kinds of products are the growth opportunity for us."

Many PC makers are also rolling out so-called ultra-light notebooks, and they are careful to not lump them with netbooks. Ultra-lights generally boast higher performance, a slightly larger screen and a heftier price tag.

The category was essentially launched by Apple Inc (AAPL.O) and its MacBook Air. However, Dell has now entered the space with its lower-cost dv2 and dv3 models. Dell also gave CES a sneak peek at its Adamo model, an ultra-light "luxury" offering whose price tag has yet to be disclosed. (Reporting by Gabriel Madway, editing by Tiffany Wu, Bernard Orr)

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