Decline and fall of the netbook

Was Christmas the beginning of the end for the sales dominance of netbooks?

Some might say that it was barely credible in the first place that netbooks -- pint-sized portables with tiny screens and slow processors - sold so well in 2009 and early 2010.

According our latest data, netbook unit sales in UK distribution fell 22 per cent in October and by an even more dramatic 40 per cent in November, compared against the respective prior-year months. Christmas 2010 will be remembered as the beginning of the end of the netbook PC phenomenon.

Mainstream portable sales, on the other hand, rose 32 per cent in October and 24 per cent in November compared to the same months a year before.

Let's look at some history. Following strong growth during the first half of 2009, our data shows that netbook sales peaked at the end of that same year, when they accounted for a staggering 37 per cent of all the portable PCs sold through UK distribution.

This was in December 2009, when seasonal consumer demand, more consumer brands, focus by consumers on price due to adverse economic conditions, and more go-to-market routes -- including telco companies - all helped drive netbook sales.

During 2010, year-on-year netbook unit sales started to slow down. There was one more quick growth spurt, during the back-to-school period in July, when student and school demand began to kick in before the new school year.

From August, netbook growth began to go down again, and sales actually started to shrink for the first time in October 2010.

Surely, following the initial hype users have become increasingly aware of the limitations of netbooks. This notion is supported by the steady, renewed growth for mainstream portable systems revealed through our 2010 data.

Q210 and Q310 saw year-on-year mainstream notebook growth rates of 26 per cent and 33 per cent respectively in UK distribution. And strong growth carried on into early Q4, with October and November reaching mainstream portable growth rates of 32 per cent and 24 per cent up from the corresponding months a year earlier.

Most mainstream portable system growth in early Q4 was driven by consumer demand. Our data shows that of all mainstream Windows-based portables in UK distribution, sales of those based on consumer OSes increased by a consolidated 39 per cent for the first two months of Q410 compared with the prior-year periods.

The second reason for the recent year-on-year decline in netbook unit sales is of course the increasing popularity of the media slate or tablet PC category, in particular Apple's iPad.

November last year saw a dramatic rise in tablet sales across UK distribution before Christmas. Albeit from a small base, tablet unit sales went up 424 per cent year-on-year in November, and 286 per cent sequentially.

Apple's iPad made up 60 per cent of all tablet sales going through our UK distributor panel during the month, with the vendor's 3G version accounting for 80 per cent of the share.

No doubt tablet sales will have an increasing impact on the portable landscape as we move further into 2011. With new tablet launches imminent, including iPad 2.0, capabilities and price points can also be expected to proliferate over the next few months.

Judging from our most recent data though, netbooks will be the form factor most strongly affected by tablets. Mainstream notebooks, on the other hand, should still do well.

Marie-Christine Pygott is a senior research analyst at Context