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Thu, 23 Oct 2008 Jobs: The iPhone is Apple's netbook

Apple has no imminent plans to compete in the growing market for "netbooks" - except for with the iPhone

Gregg Keizer, Computerworld US

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Apple has no imminent plans to compete in the growing market for "netbooks," the small, inexpensive laptops that accounted for 5 per cent of all US notebook sales last quarter, CEO Steve Jobs said on Tuesday.
But the company already participates in the category, Jobs argued, citing Apple's iPhone and iPod touch as devices that have much of the same functionality as the ultra-light, low-cost notebooks.

"We choose to be in certain segments of the market and we choose not to be in certain segments of the market," Jobs said during a conference call with Wall Street analysts that highlighted its fiscal fourth quarter earnings. Jobs was responding to a question about whether, and when, Apple would enter the netbook market.

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Repeating his categorization of the category last week as "nascent," Jobs downplayed the current market for the ultra-small laptops. "There's, as best as we can tell, not a lot of them getting sold," he said.

Later in the question-and-answer, Jobs said that although Apple would continue to add features to its notebooks as it dropped prices, he was unwilling to play in the netbook category as current defined. "We don't know how to make a $500 computer that's not a piece of junk, and our DNA will not let us ship that," Jobs said. "But we can continue to deliver greater and greater value to those customers that we choose to serve and there's a lot of them. And we've seen great success by focusing on certain segments of the market and not trying to be everything to everybody."

iPhone netbook

At the same time, it was clear that Jobs considers Apple's iPhone and iPod touch as courting netbook dollars. "One of our entrants into that category, if you will, is the iPhone for browsing the Internet and doing email and all the other things that a netbook lets you do," he said. "Being connected via the cellular net wherever you are, an iPhone is a pretty good solution for that, and it fits in your pocket."

Ezra Gottheil, an analyst with Technology Business Research, agreed with Jobs. "For Apple, the iPhone and iPod touch are a way to provide web access devices to the rest of the world," he said, referring to the popularity of netbooks outside the US. "And it prevents them from cannibalizing their MacBook lines."

Jobs, however, left the door open to a change in strategy if Apple does decide it needs to join the game. "We'll wait and see how that nascent category evolves," he said. "And we've got some pretty interesting ideas if it does evolve."

Gottheil said that if Apple did compete with the netbooks such as the Eee PC from Asustek Computer, the Aspire One from Acer and the Mini-Note from Hewlett-Packard., it would likely stick to its premium-price model. "I don't think they would go below $500," Gottheil said. The category is defined by some, including research firm Gartner, as lightweight laptops that cost less than $500.

The lowest Gottheil could see Apple going was $599, above that cut-off but $400 under its current entry-level MacBook notebook. Apple reduced the price of that model last week when it unveiled redesigned MacBooks and MacBook Pros.

According to Gartner, netbooks made up about 5 per cent of US mobile PC sales last quarter, one to two percentage points over the same period the year before. Their strong sales, said Gartner, was due in large part to the gloomy global economic climate.

"I don't know how Apple can play there," said Gartner analyst Mikako Kitagawa in an interview last week. And ignoring netbooks could come back to haunt Apple. "Mini-notebooks are expanding the market, but if you're not in the mini-notebook market, your market share will definitely shrink," Kitagawa said. "People will want to save $50, $100."

Dispute

Jobs disputed the idea that Apple is required to participate in the battle for netbook market share, and with the thinking that the company had to fight off rivals by reducing its prices. "Is the downturn going to drive some of our customers to those lower segments of the marketplace and get to buy lesser products?" he asked. "I will be surprised if that happens in large numbers and I actually think that there are still a tremendous number of customers that we don't have in the Windows world...who would like to and can afford to buy Apple products. So we'll see what the ratio of those two things are, but we're not tremendously worried."

Apple sold a record 2.6 million Macs in its fiscal fourth quarter, which ended 30 September. Sales of its laptops, up 24 per cent from the same time last year to 1.68 million, was also a record.

The company sold 6.9 million iPhones during the quarter, and has sold more than 10 million of the devices since it launched the smart phone in July 2007. Apple does not break out sales of individual iPod models.

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Comments received


Vince said on Thu, 23 Oct 2008

I think they are missing out, the netbooks were over 10% of the market sales in the last year. Would have been a great way to get people to look at Macs.

Chris Gough said on Thu, 23 Oct 2008

Apple were prepared to enter the low-end desktop market with the Mini - why not the same approach with portables?

richy said on Thu, 23 Oct 2008

thanks macworld, this is the best story i've seen about this issue.
i think steve is putting off the inevitable, they entered the mp3 player market when it wasn't developed and they brought us the great mac mini - a cheap, introductory product that's attracted windows users. an apple netbook wouldn't hurt sales of iphones or macbooks, it's a new, basic and growing market. one that's ready for apple to pounce in to.

Annie said on Thu, 23 Oct 2008

The market may not be there in 6 months if the recession really takes hold. They could miss the the mark by waiting. Only have to look at the downturn in overall electronics spending to see that if they are going to move, they should do it sooner or lay off until money is available again.

James said on Thu, 23 Oct 2008

The notion that Jobs isn't entering the market because "there's ... not a lot of them getting sold" is very hard to buy. As someone else has said, there weren't many MP3 players being sold when Apple decided to come out with the iPod. The likely real reason for this reluctance (and for the much-speculated death of the Mac Mini) is margins. Apple have grown too accustomed to what they can make on the more expensive products.

Kevin said on Thu, 23 Oct 2008

You should all know that Apple never gives their game away. All because Jobs - on record - said they wouldn't enter the market, doesn't mean they won't. Apple would prefer to surprise use, rather than give the game away. However, I'm not saying they will. As an owner of the iPhone, I can completely see his point.

Martin said on Thu, 23 Oct 2008

Kevin if you can completely see his(jobs) then you to have short comings. the iphone/itouch does not compare to a netbook simply because it lacks webcam,USB ports, keyboard etc oh and no flash for that complete web browsing experience and yes i have a macbook and an iphone matey.

gregorsamsa said on Thu, 23 Oct 2008

@Chris Gough,
The only reason I can think of is that Apple want to avoid cannibalizing sales of the highly portable MacBook Air, which offers high-profit margins. I'd buy a Mac netbook tomorrow, but I'm probably done with waiting for God know how long for Apple on this one.

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