The Line Between Netbooks and Notebooks Is Blurring

Netbook manufacturers are bastardizing the netbook market with bells and whistles that are blurring the lines between a netbook and a notebook.

We noted in a Seeking Alpha article on March 10 that subsidized netbooks will start appearing.

Along with the growing competition among software service providers, we will see a new infrastructure taking hold, modeled after Hewlett-Packard (HPQ) (cheap printer, expensive ink) and the mobile service providers (cheap cellphone, expensive monthly wireless charge). This subsidized bundle model will grow the ARM netbook to greater market shares.

AT&T (T) seems to think it was a good idea. The wireless provider is offering subsidized netbooks for as little as $49.99 in two markets, Atlanta and Philadelphia. The catch is that buyers must sign a two-year contract for an AT&T data service plan, which starts at about $60/month.

The $49.99 gets you an Acer Aspire One with an 8.9-inch display, 1GB of memory, and a 160GB hard drive. One needs to sign a two-year deal for AT&T's Internet at Home & On the Go service, which starts at $59.95 a month.

We are seeing a blurring of lines between a netbook and a notebook. We envision netbooks for multimedia purposes for watching streaming video and DVDs. Asus (AKCPF.PK) is already marketing a netbook with a DVD player. Problem is, the netbook market is migrating upward to be a low-end notebook with a small screen for a few hundred dollars less, yet it is still a few hundred dollars more than the original intention of what a netbook was supposed to be.

Intel (INTC) probably hates the situation because it is getting practically nothing for its chip, which is eroding the notebook market. Microsoft (MSFT) gets smaller licensing fees as well. The only real winner is Asus, which is a 2nd or 3rd tier notebook supplier that is trying to get market share in the mobile space.