Measuring Netbooks Impact
The decline in portable ASPs tracks closely with increasing netbook sales. According to IDC, manufacturers shipped about 5 million mininotebooks in the fourth quarter-or about half the volume for the year. Mininotebooks typically sell for under $400, many for under $300. Other ways to measure their impact: Windows XP had nearly disappeared from U.S. retail PCs in August. By December, Windows XP Home PCs were second to Vista Home Premium, with 13.7 percent market share, according to NPD. Microsoft loses massive margin on every netbook shipped with Windows XP Home, which is the majority. OEMs pay an estimated $50 to $60 per copy less than a Vista "premium" version. Those numbers are based on analyst estimates; Microsoft doesn't publicly disclose what OEMs pay for Windows.The ASPs already have been going down for months. In the seven months to February, Windows laptop ASPs fell $129-from $689 to $560. During the same time period, Mac laptop ASPs declined just $12 from $1,524 to $1,512. Apple doesn't sell netbooks. In the United States, Windows laptop ASPs already have fallen more than 20 percent. Another 20 percent would simply be devastating for Microsoft and, more severely, its OEM partners. Looking for Answers There are two immediate actions that Microsoft and Windows OEMs can take to slow margins from bleeding out of the laptop market: advertising and separating netbooks from the greater notebook market. Microsoft has already embarked on an aggressive and surprisingly successful marketing campaign: "Laptop Hunters." Contrary to the fierce Mac-PC fanboy blog and Twitter debates about pricing, the commercials are about value. In two of the three commercials, shoppers have budgets of $1,500, or nearly $1,000 more than what the average notebook sells for. NPD categorizes PCs selling for above $1,000 as "premium." At U.S. retail, Apple, with its vastly higher ASPs, has about 80 percent market share in the premium segment. The "Laptop Hunters" commercials are designed to reach buyers with big budgets in a declining economy. Microsoft is taking on Apple in its core market segment: consumers willing to spend $1,000 or more on a new computer. It's a segment where more OEMs need to go, particularly with pricing and margin damage being inflicted by netbooks.
If the trend Kitagawa predicts continues, laptop ASPs, at least in the United States, will fall below desktops. The sucking sounds you now hear are the margins being pulled from the U.S. notebook market.