Apple Readying Netbook Charge

An Apple netbook makes sense from so many perspectives that it’s impossible to believe this isn’t the direction Apple is taking.

Netbooks are smaller, lighter and inexpensive versions of laptop notebooks, a trick that is achieved by substituting cloud-based computing for most computing tasks commonly done locally by laptops and desktops. Only a year ago they were considered good for little beyond email and Web surfing, but the combination of increasingly ubiquitous wireless connectivity and the proliferation of Web-based computing tools, they have become a viable alternative to laptops for frequent business travelers, students and consumers.

There are three distinct reasons for Apple to make a concerted push into this area:

• The market for netbooks is still a remarkably green field, as most potential buyers are only dimly aware of its existence. And much like the market for virtualization technology, where VMware currently rules the roost, the market leader (in this case Acer) is leader only by default, and with ninety percent of the market still virgin territory (same as for server virtualization), the king of the mountain is still ripe for the toppling. Apple has recently shown a propensity to watch a developing market, size up the strengths and weaknesses of the early entrants, and then quickly swoop in with superior design and marketing; it has done this with both MP3 players and smartphones, and in both cases has enjoyed remarkable success;
• As Piper Jaffray analyst Gene Munster has noted, Apple has a gap in its computing product lines; MacBooks are at the high end of the scale and the iPod Touch is at the bottom, with nothing in between. Nature abhors a vacuum, and so do product managers. But there’s more than just making a pretty brochure driving Apple strategy;
• And as I’ve said before, the iPhone was never intended to remain just a smartphoine, but to prove the technology that will form the basis of the next big computing platform. Apple will also bring a device to market that has much more local capacity than the current crop of netbooks, as it has clearly found a way to cram several gigabytes of storage into a remarkably tiny device. No wonder Apple promotes business applications for the iPhone in equal proportion to consumer apps, even though there are far more consumer apps available.

While Apple executives have dismissed the cramped keyboards and drab-looking netbooks as unworthy of attention, I believe they’ve done so to prime the field for an inevitable new product introduction of “netbooks done right.” It will then swamp current market leaders Acer and Asustek – neither of which enjoy much brand recognition in the United States, nor have much experience with retail — with its well-oiled marketing machine, brand cachet, retail savvy and leading-edge touch technology.

In the long run, its only significant competition will come from Intel, which recently introduced Moblin, a Linux-based operating system designed to run on netbooks and mobile devices, and HP. The irony of Intel’s presence in the market is that it developed this technology as a reaction to MIT professor Nicholas Negroponte’s One Laptop Per Child (OLPC) project, which prefigured the netbook phenomenon in many ways. Intel rightly saw that if OLPC could develop a $100 laptop (it turns out it couldn’t, but it came close enough to prove the point) for children in developing economies, someone else could come along and make the same thing for the general consumer market.

That someone else is Apple.