HP, Dell Rethinking 10-Inch Netbooks: Report

With disappointing sales and other form factors-such as tablets-coming to the fore, HP and Dell reportedly are rethinking their investments in 10-inch netbooks, according to a report in DigitTimes. Netbooks helped the PC space stay afloat during the recession, but with better economic times and Windows 7, consumers may be looking more toward full-featured laptops.

Hewlett-Packard and Dell, No. 1 and No. 3 in the worldwide PC market, respectively, may be scaling back their investments in the 10-inch netbook space, according to reports.

DigiTimes, quoting unnamed sources from netbook manufacturers, said April 1 that the two vendors are considering the move because of disappointing sales of the systems powered by Intel's "Pine Trail" platform, which includes the company's Atom N450 chip.

With the Atom N450, Intel gave vendors and users a number of new features-including better performance by combining the CPU and graphics capabilities on the chip as well as longer battery life.

However, that hasn't resulted in a bump in sales, according to the sources, so HP and Dell officials are looking to scale back what they do with the 10-inch netbooks, and HP reportedly is considering dumping the 10-inch notebook altogether in favor of focusing on 11.6-inch systems powered by processors from Advanced Micro Devices.

The OEMs also are putting more effort behind other devices, including tablets.

According to the report, other top-tier netbook makers-including Acer (the second largest global PC vendor), Asus and Samsung-will continue investing heavily in netbooks. However, second-tier netbook vendors and white-box makers are quitting the market, unable or unwilling to keep up with deep price cuts the top-tier OEMs put in place in the second half of 2009 to boost holiday sales.

During the deepest months of the worldwide recession, netbooks-or mininotebooks-were a key to helping the PC market stay afloat. IDC analysts in December 2009 said that the combination of back-to-school sales and consumer mobile devices-including netbooks-led the PC market to 2.4 percent growth in the third quarter of 2009.

Sales of netbooks grew 37 percent over the second quarter.

Overall, the PC market is continuing a strong rebound, fueled in large part by the release of Windows 7 as well as sales of lower-cost PCs, including netbooks, according to Gartner analysts in January. Shipments in the fourth quarter of 2009 grew 22.1 percent over the same period in 2008.

Holiday price cuts and pent-up demand also helped drive sales, IDC said.

All this is good news for HP, Dell, Acer and other PC makers as 2010 rolls along, and with the recession ebbing, netbooks-with their fewer hardware and operating features-may become less attractive alternatives to full Windows 7 notebooks.

In addition, the vendor rush to tablet PCs may also further marginal netbooks. HP is working on its Slate tablet, Dell hasits Mini 5, and the big one-Apple's iPad-hits stores April 3.