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May 01, 2009

Netbook Creator Asustek Now Struggling to Keep Pace

By Michael Dinan, TMCnet Editor

It must be similar to how the Seattle Mariners felt after the 2000 season when the top prospect they recruited and developed – Alex Rodriguez (.316, 41, 132 that year) – qualified for free agency and signed a record-breaking deal with the Texas Rangers.

Just as A-Rod had emerged as the national pastime’s greatest player (don’t argue), so low-cost, Internet-ready mini-laptops called “netbooks” – first created by Taiwan-based Asustek Computer Inc. in 2007 – are emerging as a singular bright spot in the struggling consumer electronics industry.
The success of the devices, which typically sell for about $400, even have led to earnings drops and lay-offs at IT stalwarts such as Microsoft Corp. and Lenovo.
This week, we saw the introduction a new model that leverages the open source platform Android from Internet search and ad leader Google Inc., and Apple Inc. long has kept the tech media world guessing about its own rumored netbook or larger-size iPod Touch.
So where does that leave Asustek?
There’s nothing wrong with competition – fair competition is a pillar of the U.S. economy. But what chance does a smaller group such as Asustek compared to IT giants with far larger marketing and distribution means?
Though it remains the fifth-largest netbook-maker now, Asustek this week reported that profit fell 94 percent, to $13.7 million, during the first quarter after posting a loss in the fourth quarter, according to Johnson. Quarterly sales fell 27 percent, the WSJ reports.
That despite statistics that paint a picture of a technology that’s seeing a meteoric rise, thanks mostly to an insight from Asustek founder Jonney Shih – that consumers really don’t need all the features a PC typically offers, and a cheaper, stripped-down version (the netbook) could carve out a niche.
Citing IT research firm Gartner (News - Alert), Johnson reports estimates that global netbook shipments will grow 50 percent, to 7.8 million units this year, even while overall PC sales decline.
Here’s how one Gartner analyst, George Schiffler, described Asustek’s situation: “In order to remain competitive in the market, they’ll need to move beyond netbooks and do so relatively soon.”
They are, with promises of devices such as GPS-enabled smartphones.
Yet the company’s flagship product remains its netbook, the Eee brand (pictured right). Last year, Shih said, Asustek likely confused consumers by offering six successive models, as its technology developed rapidly.
“We might have offered too many models because of our competitive engineering culture,” Shih reportedly told Johnson.
Let’s hope for the sake of Apple (News - Alert), should it develop a netbook, that the product doesn’t carry as much baggage as A-Rod has brought to New York. Regardless, this has been a fascinating market to watch. Stay tuned to TMCnet for developments.

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Michael Dinan is a contributing editor for TMCnet, covering news in the IP communications, call center and customer relationship management industries. To read more of Michael's articles, please visit his columnist page.

Edited by Michael Dinan

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