TAIPEI: PC brands are hoping to replicate their success with low-cost consumer notebooks among corporate clients, but acceptance in that more demanding market could be harder. The cheaper models, called Netbooks, are customized PCs stripped down for Internet use.

Netbooks took off in a big way last year, inflicting a sizeable dent in profitability of other computer products. Following the Netbook's launch in 2007, shipments are expected to double to 21 million units this year amid an overall shrinkage of the PC market.

Intel's newly launched consumer ultra-low voltage (CULV) chip aims to bridge the gap between cheap netbook chips and more powerful and expensive chips used in traditional notebook PCs.

However, CULV laptops could actually hurt revenue for the broader consumer PC market as some consumers abandon costlier traditional laptops and go for the cheaper new models that offer reasonable performance.

Corporate customers have shied away so far. Netbooks can't handle sophisticated software. There are potential security issues that could make them more susceptible to viruses.

The end game for PC brands is low-cost notebooks that would be lapped up by corporate customers, who account for about half of all PC purchases.

"If you can have thin and light, more power and a regular price, which customer won't want that?" J.T. Wang, chairman of Acer, the world's No 3 PC brand, said at last month's launch of the world's first notebook with a CULV chip.

He expects CULV laptops to make up 15 percent of Acer's revenue by the end of the year.

Smaller crosstown rival and netbook PC pioneer Asustek is likely to join the bandwagon and unveil its own CULV-based notebook PC later this month.

Wang and other CULV backers say their computers will fill an important niche for PC buyers who want high performance but are also more price conscious.

Smaller price tags on netbooks and the upcoming CULV notebooks could be bad news for investors, as companies would have to sell many more of the lower-cost products to make the same profit from the traditional laptop.

Profits at many PC companies are already falling due to lower prices despite their shipping more computers.

"It seems to be a volume and market share game more than anything else right now for some players," said Paranab Sarmah, an analyst at Daiwa Institute of Research.

"Dollar margins on these CULV laptops are a lot lower, and the question right now is will they be able to offset the fall in price through much bigger volumes, which could be an issue especially in the downturn as companies spend less."

Reuters

(HK Edition 05/27/2009 page2)