Microsoft has announced its fourth quarter financial results, and for those of us who are Microsoft customers rather than shareholders, the most striking factoid may be this: The company’s revenue from Windows took a hit of more than a billion dollars compared to what it reaped a year ago. How come? Well, the crummy state of the worldwide economy didn’t help, but another factor was the ongoing popularity of netbooks. They typically sell for less than a $400, and usually ship with a copy of Windows XP that Microsoft can’t charge as much money for as it’s used to getting for Windows. No wonder we haven’t heard Microsoft (or much of anyone else in the PC industry, including netbook manufacturers) wax enthusiastic about netbooks.

The industry keeps predicting the imminent downfall of netbooks, which will supposedly be killed by more powerful thin-and-light notebooks which just happen to cost more. Starting in three months, those thin-and-lights will ship with versions of Windows 7 which Microsoft will be able to charge more for–and it seems like a safe bet that Windows 7 will help Microsoft’s financial statements look a little rosier in general once the OS ships. But I persist in believing that it’s also entirely possible that $400 (and $300) netbook-type computers are here to stay, and could make up a significant part of the laptop industry from here on out. If consumers buy ‘em, there’s little or nothing that PC manufacturers and Microsoft can do to stop them. And if netbooks stick around, they’ll have a profound effect on Microsoft’s fortunes whose real impact is yet to be seen.

Erica Ogg of CNET has a good story up on upcoming notebooks based on ultra low-voltage chips. They’re thin and light, with good battery life, and will run between $600 and $1000. Sounds pretty appealing–I could see myself going for one as my next notebook. I remain amused, however, by the degree to which the industry keeps saying that the netbooks it’s selling by the million are lousy machines that it needs to rescue consumers from.

From another Cnet story:

“Now, if you want a thin and light notebook, you don’t have to just pick a Netbook. You can pick an affordable notebook that has more functionality,” [Intel CEO Paul] Otellini said.

[snip]

“When we first released our ultraportable (ultra-thin) a lot of people looked at it and said, ‘oh it’s Netbook,’” said Kelt Reeves, president of enthusiast PC maker Falcon Northwest. “No, it’s close to a Netbook in size but it’s much, much more capable,” Reeves said, addressing user misconceptions.

Windows 7 may not go very far in correcting all the confusion. “Windows 7 runs well even on a $199 Netbook,” said Ashok Kumar, an analyst at investment bank Collins Stewart. Kumar said Intel may continue to have trouble managing consumer perceptions of Netbooks and ultra-thins.

Again and again, we’re told that consumers are buying netbooks because they’re confused, not because they make sense for some folks. And the fact that Windows 7 runs well on netbooks is apparently…a problem. Bad Microsoft. Bad, bad Microsoft.

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The last major PC manufacturer who didn’t sell a netbook in the U.S. is jumping into the pool: Sony has announced that its VAIO W will arrive in August. The specs are standard stuff: a 1.6-GHz Atom processor, 1GB of RAM, a 10.1-inch screen, a 160GB hard drive, Bluetooth, Draft-N Wi-FI, Ethernet, two USB ports, a Webcam, and slots for SD and Memory Sticks. It runs Windows XP. And while the price is a tad on the high side at around $500, the screen resolution is, too: It’s a relatively roomy 1366 by 768. Oh, and the W is available in three colors: berry pink, sugar white, and cocoa brown.

I’m a netbook fan, but most models are starting to blur together, since specs, features, and industrial design are usually similar. (One exception: HP’s upcoming metal-encased, feature-rich Mini 5101.) The industry still has a weird, uneasy relationship with the form factor, but now that everyone’s making ‘em, I hope we’ll see a new generation of models with additional features and some creativity in the industrial-design department. (Sony’s VAIO P almost counts as a new approach to the netbook, even though it predates the W.)

According to DigiTimes–a Taiwanese publication that’s always interesting, if not always completely reliable–Samsung is planning to release a netbook with an 11.6-inch screen and an Intel Atom CPU. Sounds cool–it’s a popular form factor with a roomier-than-usual display. But DigiTimes also says that Intel has responded by canceling Samsung’s deal for discount pricing on Atom chips, and similarly punished Lenovo when it introduced a 12.1-inch netbook. Samsung may also run into trouble with Microsoft, whose Windows 7 licensing agreements reportedly discourage netbooks with screens that are larger than 10.1 inches.

Netbooks make Intel and Microsoft nervous, since their low prices and high popularity threaten the market for costlier laptops that preserve a more generous profit margin for processors and operating systems. If I worked for either company, I’d be nervous, too. But trying to stifle netbook growth by making it tough for PC manufacturers to release appealing new models puts the companies on a collision course with consumers.

It’s a lousy development for anyone who’d like to buy a netbook with a sizable screen. I think it’s also self-defeating for the companies playing the pricing games, since the history of the PC business shows that consumers nearly always get what they want, even when pricing pressure makes it miserable for companies that make computers, components, and software.

Bottom line: If people want big-screen netbooks–and many surely do–they’re going to happen. I’d love to see the industry admit that and embrace it. Wouldn’t it be a more efficient way to do business than trying to prevent the inevitable?

People are buying scads of the pint-sized laptops known as netbooks these days, but there’s some controversy over whether they’re happy with the machines they get. Here’s some pro-netbook fodder: My friends at PC Pitstop scan millions of Windows PCs as part of their OverDrive online diagnostic and tune-up service, and as they do they ask those PC’s owners some questions about their satisfaction with their machines. And netbooks owners report that they’re quite satisfied with their systems.

Here are new rankings of the top nine netbooks for user satisfaction, as reported in this blog post over at the Pitstop site. The Overall rating is on a scale of one to four stars. Pitstop also asks users whether their PC is slow, and whether it freezes or requires frequent reboots.

(Note: #5 and #6 are lines of netbooks; the rest are specific models.)

Overall satisfaction for most of these models is close to indistinguishable. There does seems to be a pretty close correlation between overall happiness as a netbook owner and whether you find your netbook to be acceptably fast, though–90 percent of MSI Wind U-100 owners who gave feedback didn’t think their laptops were slow, and it got the highest overall ranking. Some of the machines further down the list show more discontent over performance. Virtually half of Eee PC 900 owners say it’s sluggish, for example. But PC Pitstop’s satisfaction ratings for the top 25 notebooks of all types show that it’s common for about 20 percent of owners of a particular model to say it’s slow.

Of course, netbooks are slow compared to standard laptops with beefier CPUs and graphics and more RAM. I think Pitstop’s results show that PC users are smart about calibrating their expectations and applications to the machine they’re using. They know that a netbook isn’t going to handle video editing or 3D gaming with panache, and take that into account when they decide what to run and come to conclusions about how satisfied they are.

(Although truth to tell, I think some people underestimate netbooks’ ability to run demanding applications. I have an Eee PC1000HE that I upgraded to 2GB, and just for laughs, I installed Photoshop CS4 on it. Photoshop is more than adequately fast on it. But it has a user interface that’s too tall to work on the 1000HE’s 600 pixels of vertical resolution–there are OK buttons I can’t click because they run off the screen.)

The MSI Wind U-100, Asus Eee PC 1000HE, and Samsung NC10, by the way, are all among Pitstop’s top 10 for notebooks of all types, suggesting that users don’t see them as unsatisfactory, secondary substitutes for a “real” laptop. They judge them on their own merits, and are happy with ‘em, period.

If you’ve got a netbook, how happy are you with its speed? How happy are you overall?

The PC industry may continue to be a tad uneasy with the popularity of netbooks, but there’s no question that the little guys are selling well–and not just to folks on tight budgets. Enter HP’s latest and most lavish netbook, the Mini 5101, which the company just announced. Aimed at business types, the 5101′s pricetag starts at $449 and goes up from there–which is striking in a category where most models max out at $400 or less.

But this Mini is available with features that are anything but bare-bones. You can get it with a 7200-rpm 320GB hard drive with HP’s DriveGuard safety feature or an 80GB solid-state drive; you can it with multiple-carrier mobile broadband based on Qualcomm’s Gobi technology; you can get its 10.1-inch screen either with typical netbook resolution of 1024 by 768 or the unusually high resolution of 1366 by 768.(I’d spring for the latter option in a heartbeat if I were buying this machine–the low resolution of most netbook displays is at least as significant an obstacle to running powerful apps such as Photoshop as lack of CPU and graphics horsepower.)

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Research firm NPD has released a study that says that not every netbook buyer is a happy camper. For instance, 70 percent of the folks who set out to buy a netbook ended up very satisfied. But only 58 percent of those who initially planned to buy a more traditional notebook but instead chose a netbook wound up very satisfied. The study also shows that only 18-to-24 year olds think the netbooks they bought perform better than they’d expected.

The results aren’t surprising–netbooks are only the right computers for some people, and you’re more likely to be happy with one if it’s the type of PC you want than if you’re buying it because it’s cheaper than a larger, more powerful notebook. But I find it interesting that NPD–and most of the people in the industry who I’ve talked to about netbooks–talk about them as a different type of computer than a notebook. (NPD’s release on its study begins “Netbook, notebook – they sound the same.”)

I think that treating netbooks as something other than notebooks is part of the problem here–and that consumers who consider netbooks to be notebooks are closer to getting it right than manufacturers who insist they’re something different.

Netbooks have small screens; they have basic CPUs and graphics that aren’t well-suited to high-end tasks; thanks in part to Microsoft licensing rules, they have skimpy amounts of RAM. But that doesn’t make them something other than notebooks. It makes them…small, relatively basic notebooks. To treat them as a fundamentally different sort of device is akin to Ford insisting that a Focus isn’t a car because it’s smaller, less powerful, and less luxurious than a Lincoln Continental.

When I chat about netbooks with PC manufacturers, I still get the sense that they make them very nervous. They sure make Microsoft nervous, since it can’t make the profit it’s used to getting for Windows on a $300 computer. It’s pretty common for industry types to cheerfully talk about netbooks being a fad that’ll go away real soon now.

Me, I don’t think they’re going anywhere. I think they’ll get more powerful, and the division between a netbook and a more traditional notebook will blur more and more. (Netbooks, for instance, do away with optical drives to cut costs–but even pricey notebooks are doing the same thing to shed weight, and because optical drives are no longer essential equipment.)

I’d love to see the industry do with netbooks what it’s usually done with new PC form factors–which is to work aggressively to make them more powerful and appealing. (The 1GB RAM cap is ludicrous–my Asus Eee PC 1000HE was wimpy and unsatisfactory until I popped in a 2GB memory chip.) But I still get the sense that the prevailing attitude in the industry–even among some companies that sell tons of netbooks–is that they’re an aberration that oughta fade away rather than a significant part of the future of notebooks. Can we start making them better by at least acknowledging that they are, in fact, notebooks?

I’m not an expert on how to price operating systems for maximum sales and profit. Microsoft is. So I hesitate to jump in here, but a DigiTimes story (as covered by Ars Technica) is suggesting that Microsoft may want about twice as much money from PC manufacturers to put Windows 7 Starter Edition on a netbook as it currently charges for Windows XP. Says Ars:

This translates to at least a $50 increase in price if netbook makers want to offer Windows 7 as opposed to Windows XP. That typically isn’t a big deal, but for netbooks, $50 is a very big difference, so it’s no wonder OEMs are still trying to negotiate with Microsoft. Most laptops currently offer Windows Vista, which should have a much smoother price change going to Windows 7.

Regardless of Windows 7 Starter’s pricetag, the whole boom in under $400 netbooks presents Microsoft with one of its biggest challenges ever. There simply isn’t enough profit built into netbook prices for it to charge PC manufacturers what it’s used to getting for a copy of Windows. So far, it’s managed to keep Linux from getting much of a toehold by selling Windows XP for cheap. But the situation presents the best opportunity for alternative operating systems that’s come along in a long time, and as contenders from Android to Jolicloud jump into the netbook market, it’ll be fascinating to see if they catch on…and how Microsoft responds.

(Here’s another guest post by Pat Moorhead, Vice President of Advanced Marketing at AMD. Pat’s postings are his own opinions and may not represent AMD’s positions, strategies, or opinions. You can find Pat at Twitter as @PatrickMoorhead.)

The current defacto standard used by PC makers to measure notebook battery life is MobileMark 2007 (MMO7). This piece takes a look at the basic facts behind the notebook brightness settings recommended by MM07, comparing that to some typical home electronics devices and the average settings some consumers are using for their notebook displays.

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Toshiba has been just about the only significant PC manufacturer who hasn’t jumped on the netbook bandwagon in the U.S. market. Until today, that is–the company is announcing the Mini NB205, its first small, low-cost laptop. (Toshiba prefers to call these mini notebooks, not netbooks; I don’t know if the resolution of the netbook trademark spat will affect its choice of moniker.)

When I got an advance peek at the NB205 last week, Toshiba representatives told me that the company decided to wait to ship a netbook (er, a mini notebook) until it could do it right. And the units they showed me did look decidedly upscale–the first models I’ve seen that compete with Samsung’s for general luxe feel. For $399, you get a 2.9-pound machine in a textured, metallic-finish case (in blue, brown white, or pink). The keyboard boasts the comfy and practical through-the-case design and is  as close to full-size as you can get in a machine with a 10.1″ LED screen, and the list of specs is respectable: a 160GB hard disk with a movement sensor, a Webcam, USB that charges even when the laptop is powered off, a decent-sized touchpad with well-postioned buttons, 802.11g/b WiFi, Ethernet, and Bluetooth. For now, it runs Windows XP.

Continue reading this story…

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One thing that first drew me to netbooks was the idea of living on the cloud. After losing everything on my last PC in a horrifying motherboard fire, I suddenly wanted to have as much as possible running over the Internet.

So JoliCloud’s netbook operating system, reportedly going into alpha next month, is an exciting prospect. In terms of running programs and storing files, “cloud computing” is just a snooty way of saying you do everything from the Web, but JoliCloud fancies things up a bit by sticking Web applications right onto the desktop. By fine-tuning a version of Linux, the makers of Jolicloud say their operating system is fast at booting and smooth at surfing.

Aesthetically, the screenshots I’ve seen give JoliCloud a smartphone kind of vibe. Apps are lined up in a grid with big, easily clickable buttons (it’s a natural fit for touch screens, if you’ve got one). Putting popular Apps — Gmail, Facebook and the like — front and center is a smart move: The OS seems less random than Moblin’s smattering of Web pages and more Web-oriented than Ubuntu Netbook Remix.

My main concern is how these applications will be handled beyond the initial interface. Hopefully, they’ll act like widgets, popping up seamlessly without acting too much like a Web browser window.

At the same time, I wouldn’t want to lose the things that Windows does well, namely easy access to and control over things that do reside on the computer. To put it another way, I’d want JoliCloud to act like a PC at some times and a cool e-mail/social media gadget at others.

If you’re interest is piqued, sign-ups for the alpha are available now through JoliCloud’s Web site, and Netbook Choice has the full compatibility list.

Microsoft is still wrestling with the question of how to get Windows 7 onto dirt-cheap netbooks without crushing the profit margin it makes when it sells copies of Windows to PC manufacturers. Two pieces of scuttlebutt emerged today; one sounds promising for netbook buyers, and the other is kind of discouraging.

Promising scuttlebutt: Paul Thurrott is reporting–very briefly–that Microsoft has decided to lift the three-applications-at-a-time restriction from Windows 7 Starter Edition, the version of the OS that it expects to be popular on netbooks. While there were numerous exceptions to the limit, it’ll still be good news if it’s gone–as long as Microsoft doesn’t compensate by hobbling Starter Edition in some other way.

Discouraging scuttlebutt: A site called Tech ARM has what it says is a list of limitations that Microsoft will apply to machines that qualify to come with Windows 7 Starter Edition preinstalled. They’re tighter in some places than the similar restrictions for Windows XP, and laxer in others–but the one that sticks in my craw is the continuing requirement that netbooks ship with a maximum of 1GB of RAM. RAM’s cheap enough these days that there would surely be 2GB netbooks if Microsoft didn’t try to prevent them from shipping. And I know from my experience with my own Asus EeePC 1000HE that it’s a markedly more pleasing computer with the 2GB upgrade that I installed than it would have been with half the RAM.

There’s something basically unsettling about a software provider putting rules in place to discourage PC manufacturers from selling well-equipped PCs–especially when said software provider has a big ad campaign going that’s centered around specsmanship. I hope that the rumors are wrong–or if they’re right, that Microsoft takes yet another pass at figuring out how to put Windows on netbooks in a way that makes sense.

So you spent $350 on a netbook, figuring it’d be great for surfing the Internet on the road. The problem is, YouTube can be choppy and flash games grind a bit when things get too hectic. You can’t really edit your vacation videos on the fly, either. Rage consumes.

Apparently, these sorts of disappointments are happening too often, according to Intel, whose relatively weak Atom processors power most netbooks. At the company’s investor meeting (via CNet), marketing chief Sean Maloney said some retailers were seeing netbook return rates in the 30 percent range, which he described as “a disaster.”

Consumers were getting confused because netbooks are being marketed as notebooks. “So we gently went back to some of those chains and said if you segment them differently and state up front what they do and don’t do, things will be healthier,” Maloney said. “You’ve seen some of the European channels saying this (netbook) product does not do X and being very black and white and very clear.”

Here’s a slide Intel drew up to illustrate the differences:

I suspect there’s an ulterior motive here. Intel, like computer manufacturers, doesn’t want netbooks to cannibalize demand for full-featured laptops. Reminding buyers that the $350 machine won’t play video or create content as well as the $1,000-and-up machine is a simple way to pitch a bigger purchase. The sell will get easier when $700 ultrathins storm the industry in the months ahead, so its not surprising that Dell talked about marketing them distinctly from netbooks as well.

Regardless of Intel’s motivations, it will be good for buyers to understand what they’re getting. A little consumer education is always welcome.

Dell doesn’t make the cheapest of netbooks, so I never guessed it would first to make a 10-inch model for under $300, but the proof is in the company’s May 2009 PDF catalog, hawking the Mini 10v for $299.

Apparently the news was leaked earlier than Dell anticipated, but it’s real. One user in Denmark has already pre-ordered the new model. The 10v uses an Intel Atom N70 processor, standard for netbooks, instead of the Z520 and Z530 processors used in the original Mini 10. As a result, it’s $100 cheaper.

You can find smaller netbooks, such as Dell’s Mini 9 and Asus’ 8.9-inch Eee PC, for under $300, but from what I can tell by looking at all the major netbook makers, Dell is the first to offer a 10-inch screen at this price. ZDNet, which sees the move as the beginning of a trend, believes cheaper, full-fledged ultrathin laptops from HP, Acer and MSI are the motivation.

I’ve got my own theory: Netbooks were an underdog to begin with, selling at rock-bottom prices because of their small screens and meager specs. It follows that most of their expansion has been upwards towards standard laptops, with bigger screens, better batteries and more powerful processors. Dell’s development moves in the opposite direction, using decidedly average technology to create a netbook that’s dirt-cheap, but far from cutting-edge.

In a sense, Dell’s mimicking the typical PC growth cycle. As new models hit the market, the old technology sticks around in cheaper models. It’s just fascinating with netbooks because the prices are so low to begin with.

This is a trend that I’d like to continue. Having more options at the high-end is great, but netbooks’ real appeal remains in ever more capable PCs at the floor of the price spectrum.