By Cade Metz in San Francisco
Posted in Business, 9th April 2009 21:02 GMT
As the economy continues to shrink, Google continues to crank the dial (http://www.theregister.co.uk/2009/01/12/how_the_google_stole_christmas/) on its top-secret money machine (http://www.theregister.co.uk/2008/09/02/changes_for_adwords/).
According to the latest stats from AdGooroo - a search marketing consultant that tracks search ads from a network of servers across the globe - Google expanded its ad coverage (yet again) during the first three months of the year, despite a decrease in the overall number of advertisers using its AdWords platform.
"An increase in the number of ads coinciding with a decrease in the number of advertisers suggests an artificial change in ad coverage, perhaps in response to sluggish activity, quite different from than the organic growth which fueled revenues in previous quarters," reads a preliminary draft of AdGooRoo's quarterly report, due for release on Monday.
Google's official line (http://www.theregister.co.uk/2008/10/16/google_q3_earnings/) is that by expanding coverage, it's somehow improving the "quality" of the text ads that turn up when you type certain keywords into its search engine. But the Mountain View Chocolate Factory said the same thing last year when it was actively shrinking coverage (http://www.theregister.co.uk/2008/03/18/when_google_does_evil/).
During the first quarter - a traditionally slow quarter for online advertising - the average number of ads per Google keyword reached a high of 5.25 in February, up from 4.39 in the shopping-happy month of December. Meanwhile, the number of first-results-page advertisers dropped 1.3 per cent during the quarter.
Typically, AdGooRoo says, an increase in ad coverage results in more revenue: More ads means more clicks, and more clicks means more dollars. But considering the decrease in the number of advertisers, the outfit questions whether this will still hold true.
Potentially, there could be cases where expanded ad coverage does not grow revenue. If Google posts more ads with lower per-click prices, for instance, this could shrink the bottom line by reducing the numbers of clicks on ads with higher prices. But in the end, Google controls AdWords prices - though it says otherwise. Advertisers do set the maximum price they wish to pay, but Google's top-secret algorithms, in tandem with what others are advertisers are bidding, determine how much it actually charges for a particular ad. Thanks to Google's "quality score," ads at the bottom of the page may have higher prices than those at the top.
Google's ad coverage is limited by the keywords advertisers are bidding and their daily ad budgets. But because Google controls such a large swath of the search market - more than 60 per cent in the US, according to comScore - advertisers are generally willing to pay for as much traffic as they can get.
"Our experience is advertisers are willing to take all the clicks we can give them at the current CPC [cost per click] - even in tough times," Google senior vice president Jonathan "Perfect Ad (http://www.theregister.co.uk/2008/09/02/changes_for_adwords/)" Rosenberg said during the company's fall earnings call. "We think that will continue to be true because nobody wants to turn away a customer."
AdGooroo founder Rich Stokes argues that click-for-click, Yahoo! and Microsoft are generating better leads than Google. But advertisers are still more likely to opt for Mountain View.
"There's some pretty good ROI to be found on Yahoo!, much better than Google. But the volume is so much higher on Google," he tells us. "It takes just as much effort to manage a Yahoo! or Microsoft campaign as a Google campaign, so advertisers - many of whom are shorthanded - are going to choose Google."
Anytime Google wants to expand coverage, it can do so. Certainly, the company is concerned with so-called ad quality. But when it wants the extra cash, it can always hedge that commitment (http://www.theregister.co.uk/2008/03/18/when_google_does_evil/) in the short term.
The question is whether this latest coverage-leap will boost the bottom line.
Earlier this year, CEO Eric Schmidt admitted that even Google is "not immune" to recession. "The situation is pretty dire," he said (http://www.theregister.co.uk/2009/03/04/schmidt_on_netbooks/) last month at a San Francisco analysts' conference, referring to the global economy. "During this time, what's happening is that people are using the internet more. But it obviously will affect the online-advertising markets as well - simply because our systems are so tightly tuned that if customers are buying less it will eventually be reflected in [cost per advertising click]...
"We are not immune - 'we' Google and 'we' the online-advertising industry. But we may be better positioned than other advertisers."
Pay no attention to the "finely tuned" bit. AdWords isn't anywhere near as finely tuned as Google would lead you to believe (http://www.theregister.co.uk/2008/11/26/google_ads_and_adobe/). And in all likelihood, you can ignore the "not immune" bit too. Schmidt likes to downplay the power of the money machine.
Google announces its first-quarter earnings next week. ®
Related stories
* Google flaunts Meltdown-proofiness (22 January 2009)
http://www.theregister.co.uk/2009/01/22/google_q4_earnings/
* Google AdWords: 11 herbs and spices revealed (21 January 2009)
http://www.theregister.co.uk/2009/01/21/google_secret/
* Google - your source for FREE Adobe gear (26 November 2008)
http://www.theregister.co.uk/2008/11/26/google_ads_and_adobe/
* Google - the world's first firewalled monopoly (20 November 2008)
http://www.theregister.co.uk/2008/11/20/the_google_monopoly/
* Google: 'We are Meltdown proof' (16 October 2008)
http://www.theregister.co.uk/2008/10/16/google_q3_earnings/
* Google remodels top secret money machine (2 September 2008)
http://www.theregister.co.uk/2008/09/02/changes_for_adwords/
* Screwgle™ - Google's new ad revenue model (28 July 2008)
http://www.theregister.co.uk/2008/07/28/google_expands_automatic_matching/
* Eye of newt: Inside Google's AdWords auction (24 July 2008)
http://www.theregister.co.uk/2008/07/24/the_google_auction/
* Google's riches rely on ads, algorithms, and worldwide confusion (18 March 2008)
http://www.theregister.co.uk/2008/03/18/when_google_does_evil/
Friday, April 10, 2009
Thursday, April 9, 2009
A Long Price Struggle between Microsoft vs Linux
Giampolo, how low will you go?
Linux FCS Microsoft has made a tactical mistake in deciding to compete with Apple on price in its latest, much debated, Laptop Hunters TV ads.
Until recently, Microsoft was pushing hard on the "value" of Windows. Now, though, the Laptop Hunters ads have turned the spotlight on the consistently high and - and recession proof - price tag of Apple's Macs. Its latest ad, featuring a guy called Giampolo, even dismisses Macs as putting the sexy before the computing power.
That switch of focus in the fight with Apple will rebound in its battle against Linux, because Linux is cheaper than Windows for users and OEMs serving them, according to Linux Foundation executive director Jim Zemlin.
"Value" has been a major plank in Microsoft's long campaign against Linux, which has tried to reposition the free nature of Linux code as a burden.
Zemlin, speaking at the Linux Collaboration Summit in San Francisco, California, juxtapositioned the $1,500 price of Giampolo's HP HDX laptop with what he could have walked away with instead, had he gone for Linux. Shopping around, Giampolo could have got: an HP Mini 1000 notebook with Atom processor, G1 Google phone, a 42-inch plasma-screen TV, Neuros DVR and still have given back to the planet by donating a One Lap Top Per Child PC. All, of course, running Linux.
"We are starting to see a major competitor compete on price," Zemlin said. "The thing is, if you are going to compete on price that's going to be a tough competition."
As Zemlin pointed out after his keynote, Microsoft's problem is in the licensing of Windows which automatically makes it more expensive than Linux for use on many consumer devices. That busts the margins of OEMS like Motorola - a Linux user - and impacts the price they pass on to people like Giampolo.
"What can Microsoft do apart from reduce its price to zero?" Zemlin asked.
"They are going to have to leverage what ever advantage they can to compete with Apple, and price is one thing in its competition against Linux where Microsoft is doomed to failure."
According to Zemlin, price is just one link in a chain that Linux can use to beat Windows adoption. The fact companies like Motorola can also modify code and use their own branding will also help.
"Price matters, access to the code matters, and custom branding matters and allows Linux to change entire assumptions about the market place," he said. "It's a fundamental advantage over the competition who wants to compete in the same old world of price and feature sets. We are changing the entire model of computing."
Financial Trouble: Quo Vadis Facebook?
Mar. 27, 2009
By Axel Schultze, Social Media Academy
2007 estimated headcount 450
2008 estimated headcount 800
2008 estimated cash flow negative $150MM
Above numbers reported by TechCrunch
2009 estimated headcount 1,200
That translates to a cost structure of roughly $200,000,000 (200MM)
With revenues (I don’t see more than 100MM) this is $100MM under.
Now add the enormous cost of data centers that need to stream the videos, the photos and the rest of the application.
The clock is ticking. So what options has Facebook?
1) Cut Cost / Layoff
Either cut staff in half to get to break even
That’s possible but hard to do. But better saving 50% than losing all.
It would also mean the company is getting profitable and may do an IPO in a year or two.
2) Double revenue
But with advertising? That’s so much harder when even advertising machine Google admits that ad revenue is flat – meaning it’s probably going down. After all, the world is beginning to realize that the advertising model is not a business model after all.
3) Additional Funding
Get $500 Million to survive 5 more years, freeze hiring and use the time to develop a product/service value based business model – probably the hardest but still possible. In MHO the only way to keep current investors happy. Remember Jack Walsh: "Shareholder value is the dumbest thing in the world:"
4) Sell
OK then there is the option to sell the whole package - better now than never. Maybe for a billion or two - again remember Jack Welsh.
Then there is competition (possible acquirer):
1) Google with $16B cash in the bank has some nice little wiggle room
2) Less aggressive but more stable LinkedIn could weak up (I know hard to believe) and with just a few smart tactical moves get really dangerous.
3) MySpace – don’t underestimate those guys. They are less strategic more like a news paper driven network – but they have 3 things: a) Huge momentum, b) Financial backing c) the option to break into business (they are just a bid sleepy in that regard)
4) Microsoft? Not really. No vision, totally a-social DNA, no momentum… just money and then we could list any other company with money.
5) The SAP / Oracle world. Hmm interesting. Unlike Microsoft, they haven’t burned their name in social media yet. Just two massive companies but may become an interesting contender in the game in the next two years.
Disclosure: The above numbers are just rough estimates.
But you get the idea
Wednesday, April 8, 2009
Australia's $31 Billion NBN: Smart Politics, but who is going to pay?
Apr 08, 2009
By Robert Clark
telecomasia.net
By Robert Clark
telecomasia.net
The Australian government upended 20 years of private sector-driven policy yesterday by declaring it will lead the construction of a A$43 billion ($31 billion) national fiber broadband network.
The new version of the NBN, intended to deliver fiber to 90% of Australia’s homes, requires ten times more public funding than that promised by Prime Minister Kevin Rudd on the election trail 18 months ago.
The sheer scale of the project has dramatically reshaped the troubled politics of the project. Whether the economics stack up is a different question.
Under the plan, the government will take 51% control of the new company. It is hoping that Telstra, Optus and infrastructure firms will take up the remainder.
Rudd explained his decision to take the wheel because none of the private sector bids – from SingTel-owned Optus, the Macquarie-backed Acacia and smaller local players – was acceptable. A “market failure” due to the recession, he said.
In reality the biggest failure was of the tender process itself. Having excluded Telstra because of its scant and non-compliant bid, the government was left with bit players.
Wiring Australia, with just 21 million people in a country the size of continental United States, requires the deepest of deep pockets.
After 12 years of full deregulation, Telstra is still the market’s 800-pound gorilla. This network was never going to be built without Telstra’s participation. And still won’t.
The clever politics of the Rudd decision is that it allows Telstra a way to buy its way. With the imminent departure of Sol Trujillo, the way is also opened up for a fresh start in relations between the government and the incumbent.
Telstra cautiously welcomed the plan. “We will work with the Government to assist with the implementation of its strategy,” said chairman Donald McGauchie in a statement.
Telstra investors were cheered, too, ticking up the share price by 16 cents to A$3.37 by late morning Wednesday.
But underneath the smart footwork and the stirring talk of nation-building is the massive chit at a time when public finances are already hard-pressed.
The government will start selling “Aussie infrastructure bonds” later this year, backed by a public marketing campaign – the first such promotion in two decades.
That’s telling. And that’s just the start.
Australia's World Largest Ever National Broadband Network
SYDNEY — The Australian government said on Tuesday that it would create a publicly owned company to build a national high-speed broadband network worth 43 billion Australian dollars, or $31 billion, in one of the largest state-sponsored Internet infrastructure upgrades in the world.
Prime Minister Kevin Rudd said the eight-year project would create up to 37,000 jobs at the peak of construction, giving a lift to the economy as retail spending slumps and mining companies cut workers amid weakening demand for Australian metals.
The plan is “the most ambitious, far-reaching and long-term nation-building infrastructure project ever undertaken by an Australian government,” Mr. Rudd told reporters.
The government’s announcement was a surprise rebuff to five private telecommunications firms, including Optus of Singapore and Axia NetMedia of Canada, which had been bidding to build a slower, less expensive network, with fiber optic cables reaching as far as local nodes, worth around 10 billion Australian dollars.
But Mr. Rudd scrapped those proposals in favor of a superior but more expensive network that would deliver broadband speeds of up to 100 megabits a second — fast enough to download multiple movies simultaneously — to 90 percent of Australian buildings through fiber optic cables connected directly to the buildings . The remaining 10 percent will receive upgraded wireless access.
Analysts said the government-sponsored project would be the most ambitious fiber-to-the-premises network to have been undertaken by any nation and would be watched carefully by other governments considering Internet infrastructure spending as a way to stimulate growth as the global economic crisis continues.
Britain, Canada, Finland, Germany, Portugal, Spain and the United States have all included measures to expand broadband access and to bolster connection speeds in their planned stimulus packages.
“Compared to what has been done elsewhere, this is quite a unique situation,” said Laurent Horrut, a telecommunications analyst at J. P. Morgan.
Most developed countries have relied heavily on private sector spending to upgrade their Internet networks, and those that have pledged public money have come “nowhere close” to the level of spending announced by Australia, he said.
“This will set Australia up as potentially one of the international leaders here,” Paul Budde, an independent telecommunications analyst, said in a statement posted on his blog. “This government understands the trans-sector approach that is needed to stimulate the digital economy.”
The government would make an initial investment of 4.7 billion Australian dollars in the enterprise, in which taxpayers would hold a 51 percent share.
The remaining costs would be financed by investment from private companies and the sale of infrastructure bonds. Once the network was fully operational, Mr. Rudd said, the government would sell down its interest within five years.
Mr. Rudd’s conservative opponent, Malcolm Turnbull, and some analysts criticized the plan, saying the cost of the project would most likely be passed to consumers in the form of higher Internet fees. They also questioned whether consumers would embrace a fixed-line, fiber-to-the-premises network over increasingly popular wireless services.
Even those who agree that the proposal is both sensible and achievable said setting the right price for companies to access the network would be “a major challenge.”
“A low price will discourage private investors, but a high price will discourage consumer uptake and service innovation,” David Kennedy, research director at global advisory and consulting firm Ovum, said in an e-mail statement.
While most analysts agree that investing in communications technology makes economies more competitive, some are skeptical about whether long-term spending on communications infrastructure will provide the short-term stimulus needed to pull countries out of recession.
The plan fulfills a 2007 election promise Mr. Rudd made to overhaul the country’s sprawling, antiquated Internet infrastructure. But the government is also holding the project up as a job-creating form of fiscal stimulus in a time when the private sector is shedding jobs faster than was expected.
On Tuesday, the Reserve Bank of Australia cut its benchmark cash rate by 0.25 percentage point to 3 percent, its lowest level since March 1960, amid signs the once-booming economy is continuing to deteriorate. The bank has so far slashed 4.25 percentage points from the cash rate since September in a bid to stop the country from slipping into its first recession in nearly two decades.
According to government figures released last week, retail sales fell 2 percent in February, the biggest one-month drop since the introduction of a 10 percent goods and services tax in July 2000.
Unemployment data has also gone from bad to worse. Australia and New Zealand Banking said Monday that job advertisements in newspapers and on the Internet had dropped 8.5 percent from February to March and 44.6 percent from the year before. It warned that unemployment could exceed 8 percent by next year.Saturday, April 4, 2009
QWERTY Keyboard will replace Numeric on New Cell Phones
Goodbye, numeric cell phone keypads. You're going the way of the rotary dial. Touch screens and QWERTY keyboards will take over from here, thank you.
At North America's largest cell phone trade show, running this week in Las Vegas, there were few new phones for the U.S. market that had a numerical keypad instead of an alphabetic keyboard. Touch screens also were out in force.
These changes are a recognition of the popularity of text messaging and wireless Internet use. Industry organization CTIA Wireless, which hosts the show, said U.S. subscribers sent 1 trillion text messages last year, three times the 2007 volume. Meanwhile, the same people used 2.2 trillion minutes of voice calls, an increase of less than 5 percent.
This shift in how people use their mobile devices has overturned cell phone design. According to NPD Group, 31 percent of phones sold in U.S. stores in the fourth quarter of 2008 had full-alphabet keyboards, up from 5 percent two years earlier.
AT&T Inc., the second-largest wireless carrier after Verizon Wireless, introduced six phones this week, all of which had either a touch screen, a typewriter-style keyboard, or both. At the booth of Samsung Electronics Co., the largest seller of phones in the U.S., there were no new keypad phones.
Motorola Inc., the largest domestic maker of phones, was showing off one low-end handset with a keypad. It went on sale through AT&T two weeks ago. But Motorola's big news was a model called the Evoke, which has a touch screen. It's designed for the U.S. market, though it doesn't have a carrier distribution agreement yet.
LG Electronics Inc. displayed a new handset, the GD900, that seemed to both emphasize a numeric keypad and make it vanish. A pad slides out from the GD900's body, but it's made of transparent plastic, so you can see right through it. You don't need to use keypad at all, since the screen is touch-sensitive. Other new LG phones were also dominated by touch screens.
Even at the low end of the market, keyboards for text messaging are becoming common and affordable. AT&T expects to sell two of the keyboard-equipped phones it introduced, the Samsung Magnet and LG Neon, for about $20 to $30.
Old-fashioned numeric keypads still will have a prominent place — but largely overseas. In a twist of market dynamics, the demand for QWERTY phones is mainly a North American phenomenon, said Ross Rubin, an analyst at NPD.
Although touch screens are gaining in popularity all over the world, people in other countries got into text messaging much earlier and "became acclimated to texting with a keypad," Rubin said. Meanwhile, the U.S. market has been influenced by high-end smart phones like the Treo and the BlackBerry that pioneered small versions of typewriter-style keyboards.
As a result, numeric keypads were still dominant at the CTIA booth of Nokia Corp., the world's largest maker of cell phones, which has a relatively minor presence in the U.S. The same was the case at the booth of Japanese-Swedish manufacturer Sony Ericsson.
Other notable wireless devices at the show (prices are with two-year contracts):
• The Samsung Impression is the first phone on the U.S. market with a screen that uses organic light-emitting diodes rather than liquid crystals. Since OLEDs emit their own light, rather than filtering a fluorescent backlight like LCDs, they can save on battery life and provide better image quality. The Impression has a 3.2-inch touch screen capable of showing very saturated colors and dark blacks, and a slide-out QWERTY keyboard. AT&T will sell the phone for $200 starting Tuesday. OLEDs have shown up before in camera displays, and Sony sells a small, expensive OLED TV.
• AT&T will sell the Nokia E71x, which is billed as the thinnest smart phone in the country, less than half an inch thick. The layout is similar to that of a BlackBerry or BlackJack, and includes a keyboard. Nokia has had a hard time penetrating the U.S. smart phone market, and previous, similar Nokia models sold by AT&T haven't made much of dent on the dominant market share of Research In Motion Ltd.'s BlackBerry. Despite being so thin, the E71x has a 3.2 megapixel camera with autofocus. The phone will cost $100. AT&T has no firm launch date.
• Sprint Nextel Corp. trotted out the Samsung Instinct s30, a follow-up to the first Instinct, which it introduced last year as a touch-screen competitor to the iPhone. The s30 has a thinner, more rounded body and includes a more fully featured Web browser. The s30 will be available April 19 for $130.
• Samsung is making a Web tablet for Clearwire Corp.'s wireless broadband network, which uses a technology known as WiMax. There are laptops and modems for the network, which is live in Portland, Ore., and Baltimore, but there hasn't been a standalone portable device for Clearwire since Nokia discontinued its WiMax tablet in January. Samsung's Mondi will go on sale in the next three months. No price was announced. It doesn't work as a phone, but it could run teleconferencing applications like Skype. The underlying software is Windows Mobile. Naturally, the Mondi has a keyboard and a touch screen, with a 4.3-inch diagonal.
Friday, April 3, 2009
Get Ready for Next Stage of PC Revolution: Ultra Thin & Very Cheap
AT&T announced on Tuesday that customers in Atlanta could get a type of compact PC called a netbook for just $50 if they signed up for an Internet service plan — an offer the phone company may introduce elsewhere after a test period. This year, at least one wireless phone company in the United States will probably offer netbooks free with paid data plans, copying similar programs in Japan, according to industry experts.
But this revolution is not just about falling prices. Personal computers — and the companies that make their crucial components — are about to go through their biggest upheaval since the rise of the laptop. By the end of the year, consumers are likely to see laptops the size of thin paperback books that can run all day on a single charge and are equipped with touch screens or slide-out keyboards.
The industry is buzzing this week about these devices at a telecommunications conference in Las Vegas, and consumers will see the first machines on shelves as early as June, probably from the netbook pioneers Acer and Asustek.
“The era of a perfect Internet computer for $99 is coming this year,” said Jen-Hsun Huang, the chief executive of Nvidia, a maker of PC graphics chips that is trying to adapt to the new technological order. “The primary computer that we know of today is the basic PC, and it’s dying to be reinvented.”
An unexpected group of companies has emerged to help drive this transformation — firms like Qualcomm, Freescale Semiconductor and Samsung Electronics, which make cheap, power-saving chips used in cellphones and are now applying that expertise to PCs.
As in any revolution, the current rulers of the kingdom — Intel and Microsoft, which make the chips and software that run most PCs — face an unprecedented challenge to their dominance. Microsoft is particularly vulnerable, since many of the new netbooks use Linux software instead of Windows.
“A broad shift in the consumer market toward low-cost PCs would clearly put pressure on the revenues of nearly every player in the value chain, from component suppliers to retailers,” wrote A. M. Sacconaghi, a securities analyst with Sanford C. Bernstein & Company, in a report last month. “However, we believe the impact would be especially negative for Intel and Microsoft, who today enjoy near monopoly positions in their respective markets.”
So far, netbooks have appealed to a relatively small audience. Some of the devices feel more like toys or overgrown phones than full-featured computers. Still, they are the big success story in the PC industry, with sales predicted to double this year, even as overall PC sales fall 12 percent, according to the research firm Gartner. By the end of 2009, netbooks could account for close to 10 percent of the PC market, an astonishing rise in a short span.
Netbooks have trouble running demanding software like games and photo-editing programs. They cater instead to people who spend most of their time dealing with online services and want a cheap, light device they can use on the go. Most of the netbooks sold today run on an Intel chip called Atom, which is a lower-cost, lower-power version of the company’s standard laptop chips. And about 80 percent of netbooks run Windows XP, the older version of Microsoft’s flagship software.
The new breed of netbooks, built on cellphone innards, threatens to disrupt that oligopoly.
Based on an architecture called ARM, from ARM Holdings in Britain, cellphone chips consume far less power than Atom chips, and they combine many functions onto a single piece of silicon. At around $20, they cost computer makers less than an Atom chip with its associated components.
But the ARM chips come with a severe trade-off — they cannot run the major versions of Windows or its popular complementary software.
Netbook makers have turned to Linux, an open-source operating system that costs $3 instead of the $25 that Microsoft typically charges for Windows XP. They are also exploring the possibility of using the Android operating system from Google, originally designed for cellphones. (Companies like Acer, Dell and Hewlett-Packard already sell some Atom-based netbooks with Linux.)
The cellphone-chip makers argue that the ARM-Linux combination is just fine for a computer meant to handle e-mail, Facebook, streaming video from sites like YouTube and Hulu, and Web-based documents.
Freescale, for example, gave free netbooks to a group of 14- to 20-year-olds and watched what happened. “They would use it for Internet access when eating breakfast or on the couch, or bring it to class for taking notes,” said Glen Burchers, the director of consumer products marketing at Freescale.
Mr. Burchers said a number of companies already making netbooks would show a new round of machines using cellphone chips at the Computex trade show in Taipei, Taiwan, this June.
Qualcomm, the San Diego company that built an empire on chips for cellphones, recently introduced Snapdragon, a chip created for smartphones and ultralight computers. Already, the company has announced deals to sell the chip to 15 major device manufacturers, including LG, Acer, Samsung and Asustek. Qualcomm said some Snapdragon devices appearing this year would have screens of 10 to 12 inches.
Intel and Microsoft warn that consumers should remain skeptical about the performance of a computer that costs less than $300.
“When these things are sold, they need clear warnings labels about what they won’t be able to do,” said Sean M. Maloney, the chief sales and marketing officer at Intel. “It would be good to wait and play with one of these products before the industry gets carried away.”
Still, the rise of netbooks could hurt both companies. In its last quarter, Microsoft posted the first sales decline in its history for the PC version of Windows. It blamed netbooks for the drop. On average, Microsoft charges computer makers $73 for Windows Vista, the version of Windows used in desktop and high-powered laptop PCs. That is triple what it receives for a sale of Windows XP for a netbook.
For Intel, the Atom chips represent lower-profit products, which could turn into a major sore spot if consumers become comfortable with netbooks and start to view them as replacements for standard computers.
In his recent report, Mr. Sacconaghi speculated that 50 percent of consumers could get by with an Atom-based computer for their everyday tasks. PC makers like H.P., Acer and Dell, which face razor-thin profit margins selling laptops, could use the rising competition to place more price pressure on both Microsoft and Intel, Mr. Sacconaghi said.
The big winners in the rise of netbooks that use cellphone chips could be the cellphone carriers, which would have access to a whole new market: PC users.
Intel, meanwhile, expects cheap netbooks to expand the PC market to include hundreds of millions of children who have cellphones but no computers. The company has dozens of deals in the works with service providers to seize on this potential, Mr. Maloney said. As for the emerging competition, he said Intel would show off some surprising computer designs at Computex as well.
Mr. Huang of Nvidia said the PC industry sat at an inflection point. “Disruption will come in from the bottom and forever change the market.”(Source: The New York Time)
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