Netbook Sales Sag as the iPad Arrives

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To be sure, absolute netbook sales have increased from a year ago. "They're going to be a permanent part of the landscape," says Shim. But consumers have become less willing to give up features available on full-priced laptops—such as the ability to play video games or edit photos—in favor of netbooks' low price, he says. And full-fledged laptops are themselves becoming slimmer and smaller.

Profits at Risk

If netbooks become less attractive to consumers, it could hurt PC makers' profits. Netbooks accounted for a record 26% of all PCs sold during the holiday shopping period, according to PC vendors.

During the past two years, amid weak business sales of PCs, many retailers have emphasized computers that appeal to consumers. Best Buy (BBY), the nation's largest consumer electronics retail chain, reported that netbooks contributed to double-digit growth in mobile computer sales during the holiday shopping season. Best Buy spokesman Justin Barber says the company won't discuss sales for the first quarter until results are reported.

The imminent arrival of the iPad, which goes on sale in the U.S. Apr. 3, may be partly to blame for netbooks' cooler reception. A Web survey of 1,631 consumers released Mar. 30 by comparison-shopping Web site PriceGrabber.com found that about a fifth of potential netbook and notebook buyers are considering buying an iPad instead of a more traditional portable machine.

The iPad, a touchscreen tablet computer that starts at $499, will let users read e-mail, access the Internet, watch videos, and read electronic books, magazines, and newspapers. Many netbooks, which are far less powerful, sell for about $300.

Coming Soon: More Tablets

PC makers are starting to hit back against the iPad threat. HP, Dell, Sony, Asustek Computer, Lenovo Group, and Samsung Electronics have all announced plans to market tablet-style computers this year.

In a March video on HP's Web site promoting its upcoming Slate tablet, HP PC division chief technology officer Phil McKinney noted that HP's product "runs the complete Internet," a reference to the iPad's inability to run Web graphics and videos created with Adobe Systems' (ADBE) Flash software. HP spokeswoman Marlene Somsak adds, "We'll have our own Slate out there soon, so it's not an iPad-world-or-nothing situation."

After a remarkable rise, netbooks' popularity may already have peaked.

Edwards is a correspondent in Bloomberg BusinessWeek's San Francisco bureau.

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