Eee PC-like Notebooks Unlikely To Become Blockbusters, Says IDC

San Mateo (CA) - There is an undeniable excitement that surrounds so called ultra low-cost notebook PCs these days. The OLPC XO and the Asus Eee PC have created another product segment between smartphones and traditional notebooks that is not only aimed at developing countries but is finding many friends in saturated markets as well. But despite the initial enthusiasm, these notebooks will not become "blockbusters", but are likely to remain "secondary computing devices," IDC believes.

There is hardly one day on which we don’t hear anything about the Eee PC and these new developments are typically among the most read stories we have. While we are still trying to figure out if this interest is simply because of initial curiosity or long-term interest, Bob O’Donnell, vice president, clients and displays at IDC has already made up his mind. His conclusion: These notebooks are here to stay and will see a big jump in unit shipments, but they won’t become "blockbusters".

O’Donnell said that sub-$500 clamshell devices with 7-10" screens "offer most of the functionality that many typical users want", but he found that they "make the most sense as secondary computing devices, used primarily for online activities and carried around more often than "regular" notebook PCs." An exception could be the education market, in which these computers have an opportunity to become primary computers for school-age (K-8) children.

The analyst argues that devices such as the Eee PC simply are not as cheap as the category of ultra low-cost indicates. The price gap to fully blown notebooks may ultimately be too small to convince consumers to accept the downgrade in functionality for just a few dollars. PC vendors, on the other side, are challenged by small profit margins, which O’Donnell believes will result in an environment that promotes will promote ultra low-cost notebooks as "additive products" and not as replacement products.

Still, IDC believes that worldwide shipments of the ultra low cost notebook PC will grow from less than 500,000 units in 2007 to more than 9 million in 2012. Low average selling prices will keep global revenues down - below $3 billion in 2012. As a percentage of the total consumer PC market, these devices will remain under 5% throughout this forecast period. However, ultra low-cost notebooks could eventually capture more than one third of the education market by 2012, IDC said.