Sat, Oct 31, 2009 page9

• In the modern world, connections are everything

  The success of laptops and netbooks highlights changes in how and where we work, while manufacturers are focusing their research on mobile Internet devices

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  In January 2003, Steve Jobs announced to a slightly surprised Macworld audience that “this is going to be the year of the notebook for Apple.” There was a clear ambition to push up the sales of portables — on which margins tend to be better than on desktops.

  Jobs was right in spotting an unstoppable trend: the rise of the laptop. This is a category that now includes not just “notebooks,” as Apple always refers to them, but also, since last year, the smaller “netbooks.” As Moore’s Law — a doubling in size for the same price — has applied to processors, RAM and even disk storage, laptops have become not just an interesting option for a second computer, but the primary machine for a lot of people.

  Apple didn’t quite manage to make 2003 the year in which sales of laptops exceeded those of desktop; it was July 2005 before that happened, and April 2006 before it began to happen consistently. But now laptop sales always exceed desktop sales for the company.

  

  And Apple is not the leader in this trend. Laptops are taking over computing, especially with the rise of netbooks.

  Looking at the trends in computer sales, you may wonder when laptop sales will overtake those of desktops worldwide. The answer is simple: they already have. For this year, 159 million portable machines (a segment that includes both notebooks and netbooks) will be sold, compared with 124 million desktop machines, the research company IDC says. Gartner says that in the first quarter of this year, desktop sales declined 16 percent year on year; laptop sales fell by 3 percent , but netbook sales leapt sixfold, so that they now make up 20 percent of all laptops sold.

  For computer makers, the shift to laptops offers a chance to increase profit margins. Netbooks have once again eroded those margins, but the fact that you can’t build your own laptop leaves more margin in that sector. Those are the bald numbers — but they hide a much more subtle and far-reaching shift in the way we now live our lives, said Richard Holway, the veteran analyst who is chairman of TechMarketView.

  “The obvious and banal answer [to why laptops are selling better and better] is that people don’t sit at desks any more,” Holway said.

  “In about 2002 or 2003, we started to talk about ‘mobile Iinternet devices’ which were, at that stage, only available in one form — your laptop. Which, I would remind you, weighed about 3kg, cost US$2,500, and was something that was at best luggable even then,” he said.

  “But we said then that the world was moving towards a situation where ‘knowledge workers’ would do things on the move, from a number of different devices, which had to get smaller and be able to link to the net at broadband speeds, anywhere,” he said.

  The point, Holway said, is that people don’t just want to do computing anywhere in the world — they also want to do it with a multitude of different devices.

  That change could have dramatic effects on how companies think about their investments in computers, and how they should expect people to work.

  The spread of mobile Internet access has changed approaches to connectivity. Just as mobile phones evolved over the past 20 years from being a luxury to a cheap necessity, so Internet access on the move is evolving too: driven by the widening access to 3G networks, Wi-Fi connections and even WiMax, a sort of long-distance Wi-Fi.

  But that doesn’t only have implications for the makers of laptops and providers of mobile Internet connectivity; it also affects companies that have relied in the past on desktop machines for revenues. That means, for example, Adobe, whose clients tend to be those in graphics-heavy environments, who need powerful machines to do their tasks — and Microsoft.

  It may be significant that both have recently announced significant falls in revenue and profit; in July, Adobe even introduced short-time working for its staff as a cost-cutting measure, while Microsoft has announced expense reduction measures.

  True, Microsoft receives money for Windows licenses; but it has been hit hardest by the explosion in netbook sales, because it got less money per installation than for a full-sized notebook or desktop; and netbook sales have exploded. Arguably, every netbook sale until the launch of Windows 7, even if it has a Windows XP license, represents lost money for Microsoft.

  In January, Microsoft announced falling results in which revenue from sales of Windows fell by 8 percent “as a result of PC market weakness and a continue shift to lower-priced netbooks.” On the latter, Microsoft is hoping that Windows 7 will pull it out of a financial hole; but netbooks still represent a serious threat to that model, and the launch, expected next year, of Google’s Chrome operating system could begin to eat into Windows revenue.

  The trend towards laptops has been growing for a long time. In the US, laptops first outsold desktops in the retail market for a full month in May 2005, the research firm Current Analysis said.

  NPD Group, which looked at revenue rather than units, saw the crossover happen two years earlier, in May 2003.

  Laptops had inched towards that measure a few times, but last year the US swung over wholesale towards them; the Los Angeles Times noted in January last year that the Burlington Northern Santa Fe railway (BNSF) had bought 4,000 Dell machines — of which 60 percent were laptops, in order that rail inspectors could file reports from trucks, and other staff could work from home.

  “They were in a totally tethered world, and now they have no tethering [to desks] at all,” Jeff Campbell, the BNSF’s chief information officer, told the Los Angeles Times.

  Holway thinks that this is our future and we should adjust to it, because device makers, and those providing accommodation, will cater to it.

  “I’ve just been on holiday on a ship which had Wi-Fi in every cabin. And no, it wasn’t an oligarch’s yacht — just a cruise ship. And then I was on the Jordanian desert to meet some Bedouin and spend the night there. I started wondering what the strange glow near the ground was. It was their mobile phones. And in the morning, we passed a mobile phone mast about the size of the Eiffel Tower — which they all used to keep in touch,” he said.

  Mobility isn’t just for knowledge workers. Almost everyone needs it, Holway said.

  “I had a man come to fix my front door lock, and he was able to send the invoice and my credit card payment through from the doorstep via his phone. Community nurses are getting mobile devices so they can plan their day’s work,” he said.

  Where the mobile phone used to be the method used for constant connectivity, now it is a mobile Internet device that does the same tasks — or multiple ones, such as finding a location, checking details before doing a job, checking details while on the job and processing a credit card transaction. The only places where you might still need desktop machines?

  “Banks,” Holway said. “But at the end of the day, the number of jobs that are purely static is going to fall and fall.”

  For that reason success is likely to lie with companies that can make the best mobile Internet devices, as those are the ones that have the best chances for growth.

  That, too, is not encouraging for Microsoft, which has been pushed into third place in the smartphone market by RIM and Apple, and now faces a significant challenge from Google’s Android: the Taiwanese handset maker HTC, previously responsible for more than 80 percent of Windows Mobile sales, is switching to Android. Losing with netbooks, losing on mobiles: Microsoft may have a problem with the mobile workforce.

  In fact, all sorts of expectations are changing.

  “Which company sold the most portable computers in the UK last year?” Holway asked, and leaves the answer hanging. “HP? Dell? No — Acer. It’s because of netbooks. Everybody’s buying them.”
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