Intel Pegs Netbook Cannibalization at 20 Percent

(Reuters) – Cannibalization of laptop computer sales by lower-priced
netbooks is currently about 20 percent, "less than speculation",
Intel’s European sales chief told Reuters on the fringes of a company
event.

Christian Morales said netbook sales were about 16 percent of all
notebook sales globally, and a little higher in western Europe. In
Britain and Italy they may account for as much as a quarter of all
notebook sales, he said on Wednesday.

Intel has for now cornered the fast-growing market for inexpensive
netbooks, made for simple functions such as surfing the Web, with its
"Atom" processors. Many fear that that fast market growth may be at the
expense of higher-priced laptops.

"We have seen some cannibalization of Celeron by Atom," Morales said
in a presentation to analysts in London, referring to Intel’s
processors for budget notebooks.

He said Intel’s profit margins for Atom were higher than those for the much older Celeron processors.

Twenty percent cannibalization would mean that 20 percent of netbooks sold would otherwise have been sales of full notebooks.

Stacy Smith, finance chief of the world’s biggest chipmaker, said
notebooks would be Intel’s main growth driver for years to come,
propelled by a continuing trend toward mobility.

Morales reiterated that inventories, which had been built up by
electronics makers and retailers who had underestimated the impact of
the recession, were now seen in balance with demand.

"From an inventory standpoint, we think it is really optimized for
current levels of business," he said. "Supply-chain confidence is much
higher."

Morales said eastern Europe and Turkey were currently the weakest
areas of his Europe, Middle East and Africa patch, although Russia and
the other former Soviet CIS states had seen some improvement in the
past weeks.

He said he saw greater potential to sell inexpensive netbooks in
Africa if the cost of Internet access, which he said was more than $100
a month in most of the continent, could be brought down.

"This is where we are working very actively with governments," he said.