As consumer’s say Nyet-book, enterprises sustain netbook sales in India

Netbooks have been long dead in the developed world.  And finally, the trend is catching up in India. With manufacturers pulling out of the segment and consumer attention shifting to tablets, a more evolved digital consumption device which sells for much lesser, the netbook is on its deathbed. However, enterprise sales continue to be strong in countries like India.

The final rites will be performed when some of the last standing manufacturers like Acer and Asus pull out of the segment. However, the Acer has reaffirmed its commitment to netbooks, seeing good sales in the enterprise market. The nifty device, when introduced in 2007, was touted as a cheap secondary device in developed markets. In India, when computer sales were slow in 2008-09, netbooks became a primary computing device to many.

However, with tablets becoming the preferred consumption device, netbooks have nearly been driven out of the consumer market. According to Sumanta Mukherjee, Principal Consultant at Cyber Media Research, from nearly 100,000 devices a quarter in 2009-10 sales have dropped by nearly half to 55,000 devices a quarter now.

“Very soon, it is going out of the market,” says Mukherjee. Analysts believe that most manufacturers like Dell, Lenovo, and Sony have exited the space as selling netbooks becomes unviable.

The decline of netbooks has been pronounced in the US where more than 2,000 million units were shipped in the first quarter of 2010. US sales have declined to just over 700 million units in the fourth quarter of 2011, according to IDC.

“When prices dropped at one side and the demand shrunk, the razor thin margins dropped and there weren’t economies of scale at play,” added Mukherjee.

Acer and Asus are perhaps the only manufacturers that are still concentrating in the segment. S Rajendran, the Chief Marketing Officer of Acer in India agrees that netbooks are “fading away into irrelevance.” However, he contends that that netbooks are doing well in the enterprise segment and will continue to do so as manufacturers like Acer make improvements to the device. The manufacturer has 43 % market share in India.

The consumption of netbooks in urban centers have come down over the last few quarters, especially in the top 8-10 Indian cities. However, it is still a viable option in tier II cities, says Mr Rajendran. One of the factors is contributing to the demise of Netbooks in the consumer segment is that Microsoft’s Windows 7 Starter, a relatively cheaper operating system is on its last leg and Windows 8 does not have a starter version. However, in the enterprise segment, buyers will be able to absorb the costlier operating system and with some spec up, like 2 gigabytes of memory and an improved processor, netbooks are still an attractive proposition, said Rajendran. Some of the large tech enabled education companies like NIIT and Educomp are Acer’s biggest clients in the enterprise segment. The company sells nearly 15,000 netbooks every month in India.

As netbook sales decline, tablet sales have been picking up. In the second quarter of 2012, more than 550,000 units were shipped, according to Cyber Media research. Micromax sells the most number of tablets in India, followed by Samsung and Apple. Worldwide, tablet sales are set to reach 119 million units in 2012, according to Gartner. The government has also been pushing tablet adoption in India. Over 100,000 units of Akash 2, the $20 tablet launched by the government yesterday, will be distributed in schools and colleges.