Portable PC Revenue Drops, Netbooks The Culprit

While netbooks continue to drive volume, the lower average selling point of the hardware may be a contributing factor to the decline in PC revenues.

"Mini-notes [netbooks] have been a significant contributor to volume growth in the portable PC market as their very attractive price points make owning a secondary computer viable for many consumers," said John Jacobs, director of laptop research at DisplaySearch.

However, Jacobs goes on to note that the lower price of netbooks is also hurting the overall revenue of the portable PC market.

"For 2009, we expect continued [average selling price] erosion across all portable computer categories, leading to the first [year-over-year] decline of portable computer revenue," he said.

The average price of portable PCs declined about 20 percent from the second quarter 2008 to the second quarter of this year. In the previous year, the average price of a portable PC was $849, for the second quarter of this year the average price of a PC was $688, according to the study. Netbooks have seen a particularly steep drop in price, from $506 in second quarter of 2008 to $361 in 2009, a 29 percent decline.

The fact that netbooks are getting cheaper is poised to hurt revenue in the portable PC market in 2010.

DisplaySearch is forecasting that netbooks will amount to 21.5 percent of all portable PC shipments, but due to their lower cost, mini-notebooks are predicted to only account for 10.9 percent of the market's revenue.

Overall revenue in the portable PC market from the second quarter of 2008 to the second quarter of 2009 was down 5 percent to $26.3 billion from $27.8 billion. Portable PCs, which DisplaySearch defines as notebooks with screens between 13- and 16 inches, saw sequential revenue growth to $19.7 billion in the second quarter of 2009, up from $17.6 billion; overall the segment was down 13 percent year-over-year. The revenue generated by netbooks in the second quarter topped $3 billion, up 37 percent sequentially. From the second quarter of 2008 to the second quarter of 2009, netbook revenue growth was up 264 percent.

DisplaySearch in August forecasted that notebook and netbook shipments would move past 38 million units shipped in the second quarter of 2009. Netbooks continued to see the most significant growth in terms of units shipped, up 40 percent quarter-over-quarter. Meanwhile, traditional notebooks saw a growth of 22 percent quarter-over-quarter.

The growth of the mini-notebook market has pushed vendors to adapt to market demands, and as a result the form factor of netbooks is growing. "Mini-note PC screen sizes have increased steadily, from 7.0 to 8.9 inches and then to 10.2 inches, the report said. Some panel makers and brands are promoting 11.6-inch mini-note displays, leading to an overlap with ultraportable notebooks.

However, the higher prices of these larger netbooks diminish their cost advantage, Jacobs noted at the time.