Netbooks' role debatable

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The Netbook field just got one more entrant with a new $400 mini-notebook from HP, priced well below the HP's first attempt a year ago. The Mini 1000 features an Atom processor from Intel and Windows XP and is designed to gain ground from some of HP's smaller rivals such as Acer. HP's first netbook featured a Via processor and Windows Vista.

Although Montalvo views HP's netbooks as complementary products, which a consumer would own in addition to their desktop or full-sized laptop, analysts don't necessarily see it the same way.

Jayson Noland, an analyst with Robert Baird, said last week that netbooks' place in the PC universe is still undefined.

"I don't think any of us knows yet whether it's a substitute product or a complementary one," said Noland. "In some markets in a mature economy like the U.S. or Western Europe it could be complementary, and in an emerging market it could be substitute."

Also uncertain is netbooks' impact on the balance sheet. IDC's O'Donnell fully expects to see a price war in netbooks, as companies try to boost sales to make up for the low price points.

"If you're down to $300, then your profit margin goes away, so you have to make it up in volume. Their goal is all about high volume, low margin, and I think that's going to be a challenge."

Noland said both HP and Dell have been a little late to catch on to the appeal of netbooks, but he expects them to regroup without much trouble. Dell introduced its first netbook in September.

However, Apple has been openly dismissive of the product.

Apple Inc (AAPL.O) Chief Executive Steve Jobs, on a conference call after the company's earnings, said the iPhone does many of the things that netbooks do, and said there were markets that the company was just not interested in.

"There are some customers which we choose not to serve. We don't know how to make a $500 computer that's not a piece of junk." (Reporting by Gabriel Madway; Editing by Phil Berlowitz)

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