In January, I posted on netbooks -- paperback book-sized computers that now go for under $300. To me, the netbook looked like a powerful growth trend that was boosting sales at makers by as much as 55 percent, even as the rest of the PC industry shrank 12 percent. A total of 11 million netbooks were sold in 2008 and 22 million are expected to fly off the shelves in 2009.
Netbooks are popular because many people spend a lot of time dealing with online services and want a cheap, light device they can use on the go.
Netbooks represent a big shift in technology as well. While current netbooks can run complex software for office applications and games using products from Microsoft Corp. (NASDAQ: MSFT) and Intel (NASDAQ: INTC), the newest version netbooks to be introduced in June will run on the guts of cell phones, which pair ARM (low-power cell phone chips) and Linux (an open-source operating system that goes for $3 a copy).
So don't be surprised if the companies that make those guts end up profiting from the increased netbook demand. Qualcomm (QCOM), Nvidia (NVDA), Freescale Semiconductor and Samsung Electronics all make the cheap chips. And then there are the netbook makers like Taiwan's Acer and PC vendors like Dell (DELL) and Hewlett Packard (HPQ), which are trying to catch up. One way to play the netbook trend might be to bet on a drop in Microsoft stock while buying shares of Qualcomm and Acer.
The PC industry is long in the tooth and the netbook boom will sweep away those who can't adapt. Why shouldn't investors profit along the way?
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.