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From the FT's Lex blog



The netbook is dying and it wasn't killed by the iPad.



A sub-$500 notebook with modest computing power and a 10-inch screen was a hot idea just a few years ago. Introduced in 2008, netbooks use Intel's low-cost Atom chips. Unit sales went from half a million worldwide in the first quarter of 2008 to 11.5 million in the last quarter of 2009, according to data from IDC. Intel reported in mid-2010 that it had sold 70 million atom chips for netbooks.

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The reversal has been nearly as sharp as the rise: in the most recent quarter, 7.5 million netbooks were sold. Prices have fallen too, shrinking the worldwide market by almost half in dollar terms since the peak. In the U.S. and western Europe, the market is off by nearly three-quarters. It has been reported recently that Dell and Samsung are exiting the market.



The pithy explanation for the carnage is the appearance in 2010 of a $500 computer that filled many of the same needs as the netbook -- portability, basic web browsing -- and was a whole lot sexier. But the decline of the netbook had already begun when Apple's iPad hit the market. Other factors were just as important. Higher-powered laptops got cheaper and lighter. Some users got frustrated with small keyboards and middling performance. And, as the recession lifted, many felt that they could splurge on an upgrade.



More crucially, computer and chip makers that had been desperate to move whatever products they could in 2008 and 2009 are now eager to sell higher-priced and higher-margin machines. That explains the marketing blitz by Intel and others for very light and powerful computers with fast processors and instant-on capacity -- so-called "ultrabooks", selling for around $1,000.



Perhaps the decline of the netbook was predictable. But the speed with which it happened should caution those who would predict perpetual growth for the newest new thing.

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