$300 Computer Sets New Standard

March 13, 2009— -- The last time Georgia Santos went computer shopping, she steered clear of the hulking desktops and barely glanced at the dizzying array of laptops.

Instead, the 23-year-old New York student made a beeline for the newest and cheapest species to emerge from the computing industry: the netbook.

She said she has an aging laptop at home, but instead of swapping it for a similar model, she wants to replace it with a sub-$300 Hewlett-Packard Mini netbook.

She knows this new class of computers can't compete with fully-functional laptops and desktops when it comes to memory, power and battery life. And, truth be told, she is a little worried that she won't be able to easily watch or burn DVDs on a netbook.

But she told ABCNews.com, "I work most of the time on the Internet and not with large files. ... I think it would work."

As the computing industry prepares for what is expected to be its sharpest decline in PC shipments in history, netbooks are providing a singular glimmer of hope. But though netbooks may cushion the overall downturn, they are also challengingthe very definition of pesonal computers.

"They are kind of breaking the business model," said Robert Enderle, principal analyst at the Enderle Group.

The recession, combined with our increased mobility and the spread of applications that let us store and manipulate data in the Internet "cloud," will "fuel these low-cost computers and cause us to rethink computing in general," he said.

PC Industry Prepares for Worst Year Ever

Earlier this month, the technology research firm Gartner Inc. said in a report that the PC industry would suffer "unprecedented" market slowdowns. It forecasted that PC shipments would fall 11.9 percent from 2008 levels, with desktops hit particularly hard, estimating a 31.9 percent dropoff.

Despite the parade of dismal news, Gartner predicted that shipments of mini notebooks, or netbooks, would rise about 79 percent, from 11.7 million units in 2008 to 21 million in 2009.

But though the popularity of the netbooks is surging, George Shiffler, the research director at Gartner, cautions that the netbook is not about to crush its more powerful cousins.

"They really aren't a substitute for a higher-end notebook," Shiffler told ABC News.com. "What we have been seeing [consumers] do is buy these as second notebooks to accompany computers they already have."

Though they may help the overall industry, they still comprise only 8 percent of the overall market. And, he said, they've taken off, in part, because they're a novelty."The netbook isn't the answer," he predicted.

However, Shiffler also said netbooks could put downward pressure on the prices of more powerful computers.

Netbooks Reach Tipping Point

Although smaller, lower-power laptops had been around, netbooks didn't really catch on until the fall of 2008. At that point, experts said an attractive price point, a weakening economy and effective marketing combined to push netbooks to the tipping point.

The cheapest netbooks, such as the Acer Aspire One Netbook and the Asus Eee PC Netbook, can start just below $250. But the more expensive ones, such as the Sony VAIO Lifestyle Netbook, can reach nearly $900, exceeding the cost of some regular laptops.

More money will get you a faster processor, increased memory, enhanced portability (lighter and thinner) and other features.

With more cramped keyboards and smaller (usually 8- to 10-inch wide) screens, netbooks provide a different experience than full-size laptops. But if you can get over the size issues, netbooks offer a wide range of services, from Web browsing and word processing to video chatting (many come with webcams) and photo editing.

Gamers and video editors would definitely need another computer to meet their needs. And though you can watch videos online (from YouTube and Hulu, for example) you would need to use an external DVD or USB drive to watch movies offline.

But the manufacturers would also like to see consumers buying their more expensive, fully functional computers, and they caution consumers against relying on netbooks alone.

Netbooks as Companions Not Replacements

"In general, this is a companion product to notebooks or desktops," Ted Clark, senior vice president and general manager of Hewlett Packard's Notebook Global Business Unit, told ABCNews.com. "What we're seeing is that this is more of a market expansion opportunity. It's difficult to judge cannibalization."

Clark emphasized that if you need to work with spreadsheets or you want to use your netbook to watch movies, you might be out of luck.

People who think the netbook can be their primary computer now, might feel disappointed several months down the road, he said.As for the growth in netbook sales, Clark said, in this economic climate, "I would contend that those folks wouldn't be out shopping if not for the notebook."

Netbooks Lower the Theshold

However, even if netbooks aren't positioned to replace laptops and desktops, experts said that their impact may still be felt in the long-term.

They may not be as powerful as larger computers, but netbooks have awakened consumers to the realization that they can get a real, not toy, computer, for as little as $300.

"What netbooks have done is change the threshold," said Lance Ulanoff, editor in chief of PC magazine.

If you're a gamer or a graphic designer, he said, the netbook would not be able to keep up with your computing demands.

But for many others, "netbooks will be your entry-level laptop," said Ulanoff. "Clearly there's a concern and maybe there's a bit of reality that we're looking at the new normal and that there's no going back from this."