Why Apple doesn't make a netbook

The clamor for Apple to join the netbook market continues to increase from all sides. But are the low-cost portable devices a fit for Apple's product line?
Written by Seb Janacek, Contributor
As netbooks continue their inexorable rise up the wish lists of gadget hounds, businesses and ordinary folk alike, the clamor for Apple to join the market continues to increase from all sides.

That's despite both Steve Jobs and interim CEO Tim Cook categorically denying that Apple is about to enter what has been described as a 'nascent' market.

Jobs has also suggested that the iPod Touch and iPhone is in essence a kind of netbook, based on what they are commonly used for. He's not fooling anyone though.

Starting from essentially zero market penetration in late 2007, by the end of last year, roughly 10 million netbooks have shipped, according to IDC. They now account for seven per cent of all portable PCs, an extraordinary growth rate in a short time.

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So what defines a netbook?

Jobs may have a point in that the Touch is great for web browsing and email, is lightweight, has wireless and is relatively cheap.

It's not ideal for office or productivity tasks. I'm a fan of the soft keyboard and will happily 'tap' out a hundred words or so of an email but a longer document is painful.

But at what cost? It's a loaded question.

Firstly, as Jobs claimed late last year, Apple doesn't know how to make a $500 Mac that 'isn't a piece of junk', as it's not in the company's DNA. Consider the current Mac Mini. A mere $100 above the $500 price point and it looks overpriced, probably because it is.

Secondly, Apple would undoubtedly sell bucket loads of shiny units if it did release a sub $500 OS X-powered netbook.

However, given the company would be competing in an aggressive and increasingly populated market with price being the key differentiating factor, its margins would be cut and its profits would suffer. An anathema to the Apple board.

Furthermore, sales of netbooks would cannibalize sales of higher margin, higher specification MacBooks, again resulting in more loss of profit.

Lest we forget, Apple has somewhere in the order of $28bn in cash thanks to its aforementioned high profit margin strategy and is well placed to sit out tough economic times and come out smiling the other side without compromising the same strategy.

Appealing to a customer who focused solely on price makes no sense to Apple. Someone who cares solely about price has a casual interest in quality and that is another anathema to the Apple brand.

Perhaps the very best reason to explain why Apple isn't bothering with netbooks for the time being was illustrated in a report from retail analysts Channel Checkers.

The firm surveyed Apple stores to track sales of iPod and Macs along with business trends at Apple stores in the US. According to their survey, 73 per cent of respondents said the top-selling computer was the MacBook Pro.

The top selling Mac in most Apple Stores surveyed was the high end MacBook Pro. The highest specification notebook Apple produces. In the US it retails between $2,000 and $2,800. Hardly low-cost netbook territory.

As we stand there are two reasons Apple isn't selling netbooks.

Firstly, Apple doesn't make netbooks because it can't work out how to make a notebook that can compete in that $500 space.

Secondly and more importantly, Apple doesn't make a netbook because, right now, it doesn't need to.

This article was originally published on silicon.com.

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