Has Nokia’s Booklet 3G Priced Itself Out of The Netbook Market?

When Nokia announced on 25 August that it would be entering the mini-laptop, or so-called ‘netbook,’ market, it was news greeted with some surprise.

After all, companies such as HP, Acer, Dell and Lenovo have already packed the marketplace with cheap, ultra-portable laptops. So how would yet another one manage to differentiate itself within that crowded room?

Despite the original appeal of netbooks centring on their low cost and small form factor giving them the ability to take them anywhere, both the price and specifications on many of these devices have been creeping up in recent months. In effect, the line between what constitutes a netbook – which allows you to go online anytime, but whose weaker processor starts to struggle if you try to run any high-end applications – and a lower-end traditional notebook has become somewhat blurred.

Nokia’s Booklet 3G is somewhat more high-powered than many of the netbooks out there. It features a 10.1-inch screen with a 1280 x 720 resolution, built-in WLAN and WWAN connectivity for WiFi and cellular networks, a 1.6GHz Intel Atom Z520 processor and Intel Poulsbo US15W chip with a fanless design and 1GB of 533Mhz DDR2 (double data rate 2) memory. Constructed from a single piece of machined aluminium, the device weighs 2.75 pounds and measures 10.4 x 7.3 x 0.8 inches.

Te sticking point for many users shopping for a netbook, however, may be the Booklet 3G’s retail price $820 or €575 (£502), which represents as much as a fourfold increase over the price of certain netbooks. Kai Oistamo, Nokia’s executive vice president, may have suggested in a statement that Nokia’s device represents “a natural evolution” for his company, but some analysts feel that its price point, combined with the offered features, could actually make it a marketplace misfire.

“Prices have crept up a little bit, but products over $600 [£365.53] haven’t been selling well,” said Enderle Group analyst, Rob Enderle in an email interview. “Granted, this will likely be subsidised by a carrier, bring the out-the-door price after subsidy down to around $500 [£305], but that still isn’t cheap and will require an iPhone-like data plan – $60 to $90 [£37 to £55] a month.

“It really looks to me like they’ve priced themselves out of the market with this device,” Enderle continued. “Given the current market conditions, this product shouldn’t do well.”

While the industry as a whole may attempt to push the price of ultra-portable devices higher in order to boost its profit margins, Nokia apparently still runs the risk of breaking through the price ceiling with the Booklet 3G, once its specifications are taken into account.

“If you’d come out with that netbook two years ago – had a very cool, small netbook for $800 – that would have been dramatic. Back then, ultra-portables were premium,” said Roger Kay, Endpoint Technologies Associates analyst. “But now it’s harder to come in with a high-priced version.

“The industry would like to see the netbook move up from the rock-bottom price area,” Kay added. “The ultra-thin category is the industry’s bid to move everything up and give it better graphics capability, for $250-400. Even if this Nokia device is better, though, people will be asking, is it three times better?”
Ultra-thin models, Kay felt, will eventually fall into a $500-$600 price range; where, anything above that would be ill-positioned to prosper in a market where both businesses and consumers are still watching their IT spend amidst a weak economy.

Manufacturers and software developers would certainly like to see ultra-thin laptops become the wave of the future – if only to help bolster revenue and profit. In July 2009, Microsoft chief executive Steve Ballmer suggested at the company’s annual Financial Analyst Meeting that manufacturers would try to counter margin-destroying netbooks as soon as the 2009 holiday season was over with new ultra-thin PCs scheduled for roll out, which would provide lightweight computing at a slightly higher price point.

“We want people to be able to get the advantages of lightweight performance and be able to spend more money with us,” Ballmer said at the time. Ultra-thins with more powerful processors would theoretically be able to run more highly-priced editions of Windows 7.

Sony recently began to blur the line between ultra-thin and netbook with its announcement of a new Vaio X notebook that would include an 11.1-inch display, Atom processor and built-in 3G capability. Other netbooks have seen their screens widen, bringing them beyond the blurred border into ultra-thin and traditional notebook territory.

Will the industry succeed in weaning consumers from netbooks onto ultra-thins and other portable PCs with a higher price point? One could argue that the economy will play a substantial effect; as long as the recession lingers, people will be more inclined to sacrifice details like processing power for a lower price.

And, although small-to medium-sized businesses (SMBs) and the enterprise have a tendency to gravitate towards more powerful machines, the better to run higher-end applications and software packages, they may stay out of the netbook and ultra-thin markets entirely due to concerns over processing power – unless they bulk-purchase the devices for salespeople or other road warriors.

The risk, then, is that manufacturers will attempt to introduce a product category, ultra-thins, that never really catches on: proving too expensive for ordinary consumers and not capable enough for the majority of business that performs most of their daily functions within an office environment. As the industry rolls out more ultra-thins, and raises price-points on netbooks, products such as Nokia’s Booklet 3G could serve as test cases to see whether manufacturers are headed down the right road.