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Plenty of industry-watchers say that netbooks are cannibalizing
sales of traditional notebooks and sacrificing average selling prices
of portable PCs. But could that just be the tip of the iceberg?

While PC giants such as Dell and HP are forecasting a significant PC
refresh cycle for early to mid-2010 as pent up demand and the arrival
of Windows 7 push businesses to finally upgrade their PC fleets, the
disruptive forces of thin clients and mini-PCs such as netbooks and
nettops may be looming ahead, largely undetected, and about to sink the
refresh ship.

While net tops haven’t made a huge splash yet, some VARs and analysts
believe there’s plenty of potential for nettops, netbooks and thin
clients to actually replace many PCs in business settings.

“Many users only need internet access and light computing like word
processing, and these machines are tailor made for that,” says Jude
Daigle of PA Computer Connection in a Pittsburgh, Pa.-based solution
provider. “Now that the genie is out of the bottle manufacturers will
not be able to push it back in. Even low power machines run most
applications very well, and Windows 7 runs well enough on the Intel
Atom processor for most people’s portable needs, so why spend more than
you have to?”

Daigle’s company sells Acer machines, and Acer recently introduced a net top with enhanced video – a machine that is aimed squarely at business users and only available through the reseller channel.  And other companies, including Daimler Chrysler, that are looking to cut costs have turned to PC alternatives such as thin clients.

While the market for low-powered net tops and netbooks is just starting
to take hold in business, the potential is there, some analysts agree.

“Acer is positioning their net top as a desktop replacement for
knowledge workers who require little beyond a browser and Microsoft
Office,” says Charles King, principal analyst at Pund-IT. “That
actually describes the needs of many PC users, so it’ll be worth
watching how well Acer’s and similar products do among consumers,
particularly as next generation products with Nvidia graphics
processors/technologies hit the market.”

But will it completely disrupt the business PC buying cycle? King is doubtful.

“I’m not sure how disruptive they’ll be to the market as a whole,” he
says. “While they’re cheap compared to conventional PC and notebooks,
they’re also poor choices for common applications with muscular
processing and memory requirements”

The price difference between netbooks and traditional laptops is also a
much bigger than the difference between net tops and traditional
desktops, Rob Enderle, principal analyst at The Enderle Group points
out.

“These net tops could be very attractive to a market looking for new,
cool and inexpensive,” he says. “However, they are also a little
limited and regular PCs are priced much closer to these price points
which makes this more of a stretch than the netbooks were… the
perception of a big price drop isn’t as evident here.  It is going
to depend a lot on how this stuff is positioned.”

Customer acceptance of such technologies will likely play a big role in
the uptake of these low-power and thin clients, and that’s where VARs
may play an influential role in the fate of these technologies for
business.

“At this moment, I don’t expect this to significantly impact the
refresh cycle, though the potential is certainly there,” says M.J.
Shoer, president of Jenaly Technology Group in Portsmouth, Maine. “In
the last 90 days, it seems like a flurry of vendors have been rolling
out virtual desktop solutions that are prime to take advantage of this
class of hardware.  The key will be client acceptance of virtual
desktops.”

And according to Marc Harrison, president of solution provider Silicon East, the acceptance isn’t there yet.

“Most users want the full Windows desktop experience,” he says. 
“We’ve tried – thin clients and virtual PCs are not ready for prime
time yet, and frankly, aren’t cost-effective either.”

Harrison still believes the PC refresh cycle is coming, driven largely by the aging fleet of PCs still in operation out there.

“There is no question that Windows 7 is going to be huge for the
channel,” he says. “All of those 5-8 year old Windows XP boxes have got
to be replaced, and users are painfully aware of that.”

But while thin clients may not be ready for prime time, netbooks and net tops still have a following.

“We see netbooks hitting the sales of the more powerful notebooks every
day,” says Daigle.  “For example, a business user that has a good
desktop at the office and enjoys the flexibility and power of the
desktop will often buy a netbook to take on the road with them so they
can do some document editing.

“…As a reseller, whatever I can do to make projects more affordable for
our clients is something we welcome,” he adds.  “If you have a
value-add they can be great for business, but if you don’t it’s just
another nail in the coffin for equipment sales.  As they are
commodities with no margin   and not worth the effort to
stock or actively sell.”