Netbooks Spell Disaster For Phone Makers

Smartphone vendors that make Windows PCs will fail because the markets are too different, warned analyst Canalys at a conference on mobile devices.

Smartphone makers are used to very high margins on their devices making for a profitable business, while netbook disributors may be making as little as ten cents (£0.06) for each netbook they sell, said Steve Brazier, chief executive of Canalys, at the Canalys Mobility Forum in London.

“Every PC maker has some sort of initiative in the smartphone space, said Brazier. “For smartphone makers to go the other way doesn’t make any sense,” He did not name any products, but obviously had Nokia’s move into PCs, with its Booklet 3G in mind.

Although both netbooks and smartphones – the two subjects of the Canalys event – are growing, netbooks are expected to level off, said Brazier. Meanwhile traditional notebooks will resume their fast growth as they completely take over from desktop computers.

This will be a big relief to the dominant players: “Netbooks have been a necessary evil for Wintel,” he said. “They have kept the industry going this year, but have been detrimental to Windows and Intel.

However, netbooks and notebooks are both products with very low margins, and very little differentiation: “If someone launches a new phone, it’s on the front of the financial pages,” said Brazier. “If someone launches a new PC, they barely bother to send out a press release.”

The conference predicted that profits available in smartphones will eventually decline but netbooks are already low-cost devices with no margin to spare. They also require different skills, as vendors have to manage the equipment in their distribution network well. Laptops have specific national keyboards, so any overstock cannot be shipped to a different country, said Brazier.

Smartphone makers are used to markets where most of the money goes to operators for the network services, but everyone else gets a decent share, said Brazier, That doesn’t happen in the market for Windows laptops. “A smartphone vendor not in the PC market will fail if it goes down the Wintel route.”