Dawn of the netbook

In a crowded conference in Delhi’s Nehru Place in mid-2006, Craig Barrett, then Chairman of Intel, the world’s largest semiconductor maker, spewed venom at the One Laptop Per Child (OLPC) initiative started by Nicholas Negroponte, the head of the Massachusetts Institute of Technology’s Media Labs. The concept of a cheap laptop was ridiculous, bristled Barrett. It did not help that OLPC was using the ‘Geode’ processor made by rival AMD Corporation.

However, back at Intel’s development centre in California, an altogether different scene was unfolding. Intel, regardless of Barrett’s public vitriol, had begun work on the ‘Atom’ processor that was aimed at powering exactly the kind of machine that Barrett was excoriating at Nehru Place—a laptop ‘lite’ that people were beginning to refer to as ‘netbooks’.

Today, Intel’s Atom chip is in the middle of the next great revolution in computing—the soon-to-be ubiquitous, no-frills, super-light laptop called the netbook. At the most recent Computex—the gargantuan world computer fair-cum-circus— held in the Nangang Exposition Hall in downtown Taipei, Taiwan, girls in skimpy polyester dresses advertising the latest computer wares weren’t the only ones attracting attention. In fact, almost everyone there seemed utterly captivated by the toy-like notebooks on display.

So far, 14.6 million of them have been sold worldwide in 2008, grabbing 11 per cent of the ‘portable’ computer market and numbers are expected to touch over 26 million in 2009. In India, 73,000 were sold last year, according to Vinnie Mehta, Executive Director, Manufacturers’ Association for Information Technology (MAIT), India’s hardware industry body—barely five per cent of the sales of 1.5 million ‘portable’ computers last year. Now, these numbers may not get the adrenaline of anyone in tech sales pumping— but according to most experts, it soon will. The reason for this is simple. India is at a unique tipping point in computing where a variety of trends have all serendipitously collided together to propel netbooks forward as the next big thing.

First, netbooks are cheap—around Rs 20,000 on average and a third of the price of a mid-range laptop, and at par with many high-end mobile phones, thanks to the lack of fripperies like disc drives, or abundant memory. Then, upcoming broadband auctions promise to ramp up connectivity. Plus, India has a wave of increasingly younger people who are Net junkies. Also, incomes across middle-class India have swelled, allowing a vast swathe of people who would normally not be able to afford a laptop to be pulled into the orbit of a netbook.

“Netbooks are creating a whole new category among ultra-mobile users, students and in the SME segment in class B and C towns,” says Rajan Anandan, CEO, Microsoft India. Naturally, a variety of computer makers—from Lenovo to Hewlett-Packard—have dived into the fray with models for the Indian consumer. Already, 40,000 units were sold just last quarter alone, according to S. Rajendran, General Manager, Sales and Marketing, Acer India. Acer expects the market for netbooks to be 175,000 units this year.

Another powerful trend is giving the netbook a fillip: cloud computing. “You do not need to have a whole lot of hardware to power applications on your computer, because the applications will be hosted on servers on the Internet,” says Vinay Goel, Director, Products, Google India. “Today, applications are available from Google among others, that allow document editing, image manipulation and data storage online. This has become so mainstream that even Microsoft is planning to launch an ‘ad-supported’ free variant of their next release of the Office suite later this year,” he adds.

So how does one predict the evolutionary path of such a radical device? Some see it as akin to what a landline phone used to represent— only one per household, usually accorded primacy in the living room, then gradually proliferating to the master bedroom and even the kids’ rooms. Similarly, the netbook promises to push the PC concept from one per home to one per family member. Warning: “Don’t compare this to mobile phones, because here there is a question of content as well. Compare this to the rise and rise of cable and satellite TV,” says MAIT’s Mehta. “Initial demand led to Zee TV entering programming and that created a virtuous cycle of increased hardware sales leading to even more content,” he adds. Mehta points out that just like TVs in the 1990s, netbooks have vaulted over the hardware price barrier and once robust broadband kicks in, more content will be generated leading to even more demand for netbooks.

Now, considering the popularity of multimedia applications, including games, amongst youth, a relatively slower netbook will be sure to sink. Enter Nvidia, which has developed the ‘Ion’ chipset which couples Intel’s Atom processor with a Nvidia graphics one. “There is a lot of high-definition video content, even average users want to play casual games, so you cannot say that netbook users are ‘basic’ users,” says Igor Stanek, Nvidia’s product PR manager for the Ion. Still, fact is, the netbook’s evolution has only just begun and its avatar today may be radically different from what it will look like five years down the line. A case in point is Nokia’s Booklet 3G (see Nokia’s Return to Computing) which by operating off a regular SIM that you and I use in a phone, will promise to revolutionise the way people connect to the Net while on the move.

Another critical driver bound to fuel the future growth of netbooks in India: the rapidly growing education sector. “The problem with computers in India today is a lack of content, but with hardware becoming cheap and convenient through netbooks, I think ubiquitous wireless broadband coupled with educational applications will transform the computing landscape,” says Naresh Gupta, Managing Director, Adobe India. S. Rajendran, General Manager, Sales and Marketing, Acer India, points out that Acer is already in talks for an order for 5,000 netbooks for an educational institution.

Not to be outdone, Intel has also linked up with Indian computer maker HCL to develop, not just a range of netbooks, but also ‘nettops’—small desktop computers with netbook innards. “These will be even cheaper because they can use off-the-shelf hardware for monitors, mice and keyboards and they will not have the expensive battery,” says Ramamurthy Sivakumar, Managing Director, Intel India. Moreover, telecom operators are currently exploring the possibility of bundling netbooks with broadband services, giving these devices a tremendous boost.

Still, despite all this excitement in the netbook space, some challenges exist. The netbook/notebook distinction is already becoming muddled. Computers with the ‘netbook’ form factor—small screen, smaller keyboard and low weight but packing in the processing power of high-end notebooks—are becoming popular as computer manufacturers increasingly dump the DVD drive. At the same time, some netbooks are gaining larger and larger screens— a 12-inch netbook is only a bit smaller than a 13-inch notebook. This has given computer makers an existential crisis. What then is a netbook? Computer makers are now defining it as a series of features that include its lowcost hardware and the fact that netbooks will live off cloud applications. Yet, some in the industry believe that the ‘netbook’ term will incorporate all 10-inch (screen size) and below computers.

Whichever way you want to define it, a robust compact computer minus the ‘extras’ and priced at around a third of a mid-range laptop will attract hordes and this has automatically generated a whole new level of competition. Makers of mobile phone processors like Freescale and Qualcomm want a piece of this new hardware action. And then there is Nokia, whose entry into netbooks has changed the product and could reshape its future. Microsoft’s Windows XP, which is the standard operating system in 70 per cent of netbooks globally, is being replaced by Windows 7—an operating system developed with netbooks in mind. But both Intel (Moblin) and Google (Chrome) are also throwing their hat into the operating system ring. The netbook wars have only just begun.

Nokia’s Return To Computing
In 1991, Nokia’s then-CEO Kari Kairamo was trying to reinvent the (then) 120-year-old conglomerate and was persuaded by the head of Nokia’s mobile phone division, Jorma Ollila, who would go on to succeed Kairamo in 1992, to dump the computer division. Which the firm duly did. Eighteen years later, Ollila’s successor Olli-Pekka Kallasvuo has seen the future and that future involves a return to—surprise!—computers. Not just any computer though, but more specifically a ‘netbook’. While its portability may cannibalise some of Nokia’s high-end E-series and N-series phones, the product may prove to be one of the biggest cash cows in Nokia’s storied history.

The Nokia Booklet 3G, which will be showcased at Nokia World in early September, is not your typical netbook, even though it will have an Intel Atom heart and Windows for its brain. For one, Nokia claims it will stomp the competition on battery life, promising 12 hours of run-time. But it is on connectivity options that Nokia has the competition trounced: The Booklet 3G will have an in-built 3G antenna and a slot for a SIM card as well as a High-Definition video (HDMI) output.

Nokia has bowled quite a Googly, especially since sales of its high-end devices are being eroded by Apple and Research In Motion (makers of BlackBerry). Consequently, it is hoping that the firm’s brand image—far superior to that of most computer makers, especially in the developing world—as well as its unmatched distribution in countries like India, can play a big role. Sometimes, in business strategy, it seems that you have to move far away from the past in order to re-discover the future.