Mojo lost: how netbooks are pwning Apple

David Braue
20 February, 2009
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I have a dirty little secret to tell. I’m in the market for a small portable computer, and I’m not entirely sure it’s going to be a Mac.

Before you get out the pitchforks, perhaps I can explain why. You see, I already have a notebook – one that’s several years old, runs Windows, and is on its third battery because, as I’ve found, notebook batteries don’t always last well if the systems are used most of the time when plugged into AC power.

While I the notebook was once primary desktop machine, that role is now occupied by my iMac; the notebook is only really used for doing word processing and recording the occasional conference speech using Audacity. I don’t even keep documents on it anymore, since discovering the joys of automatic syncing via my 3G wireless service and Dropbox.

Given its marginal role in my daily activities, I’m not sure I can justify the cost of a MacBook or MacBook Pro when I have such specific and easily-met requirements. For occasional road warriors like me, battery life and good connectivity are more important than sheer speed and jaw-dropping graphics. My needs, I have come to realise, would be just as well met if I put the $200 I’ll pay for a new battery towards a $500 netbook (or even a $350 one of the sort regularly sold through Catch of the Day and other sites).

And, since Apple has repeatedly declined to make one, well…

It’s not just me. It’s really not. In fact, this week we have two reports suggesting that while demand for Apple’s MacBooks remains, it is actually – Heaven help us all – Windows shipments that are the bright spark in the PC market. Indeed, NPG Group tells us, compared with January 2008, sales of all Macs fell 6 percent during January 2009 – while Windows shipments were up 16 percent.

Blame netbooks, the recession and economies of manufacturing scale for this: increasing competition in the sub-$1000 space is proving to the market once and for all that good notebooks don’t need four-figure price tags at all. I have field-tested several over the past year, and while I wouldn’t be editing video on them, they do more than enough for most consumers.

Computer buying intention figures out today suggest gains by MacBooks are negated by a decline in intention to purchase iMacs – leading ChangeWave analyst Paul Carton to predict that Apple will “muddle through” the market turmoil.

Just how it might do that, will be quite interesting. Apple has repeatedly opted out of the netbook market – understandable given that it needs to keep higher-margin MacBooks moving – but it risks serious damage in the market if it can’t make a convincing play in this space.

If you think I’m being histrionic, consider the recent decision by the Victorian Department of Education and Early Childhood to purchase 10,000 netbooks for Victorian students in a trial of one-to-one computing. The NSW Department of Education is in the midst of its own netbook tender, looking ready to spend more than $200 million on systems for its 200,000 students.

This sort of thing just isn’t economically possible with notebooks costing $2000 and up, but when a netbook can be had for $500 – the top allowable price in the NSW program – it suddenly opens significant new possibilities.
And Apple, which has long had a strong following in the education sector, will see none of them. I’m sure an Apple device would be a contender in a tender like that, but Apple’s resistance to netbooks has forced it to cede a major market opportunity.

More worrying, Apple has lost a major opportunity to influence the computing habits of 10,000 (and potentially more) Victorian and 200,000 NSW school children, who will grow up to be computer-using university students, and then computer-buying adults.

Were they becoming familiar with a Mac OS X-driven netbook, those children would likely be lifelong Apple customers. However, since they will be educated on Windows, Apple will for years face the same challenge it faces now: convincing long-term Windows users to switch to the Mac. Macs, for all their merits, will remain a niche choice for alternative-minded thinkers.

There’s nothing more disruptive than having your whole business model thrown off by an unexpected dark horse, but that’s exactly what Apple now faces as rapidly shifting computer buying patterns threaten its established product hierarchy. I expect more disruption this year in the form of bundled 3G-and-netbook offerings like the one Vodafone recently launched: these compelling combinations come with 24-month contracts that will lock customers out of any netbook Apple might launch before 2011.

Keeping its head in the sand will do nothing to help Apple counter this threat, which most definitely promises to undo many of the market gains Apple has justly made over the past few years. If Apple wants to remain relevant in an era of cost-conscious computer buying, it will figure out an answer to the netbooks question – and fast – as well as reviving its low-cost Mac mini.

Apple has a long history of building its product as and how it wants, but these are extraordinary times. Rapidly shifting buying patterns seem poised to force Apple’s hand in a most uncharacteristic way. I want to buy Mac — I really, really do — but given the availability of other options, it’s hard to justify the extra $1000 or more for a MacBook. I can wait a bit longer (at least until my battery stops charging altogether); however, continued silence from Cupertino may well drive me – and millions of other computer buyers – into the arms of Microsoft.

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