Can an Apple Netbook Ride iPhone Success?

CIO —

Will Apple's rumored 10-inch touchscreen netbook make a splash in the enterprise?

With sales of pricey Macs sputtering, Apple may be looking at the emerging netbook market to kick-start business. Rumors of an Apple netbook-like product in the works gained steamed last week after leaks surfaced that Apple bought 10-inch touchscreens from a Taiwanese manufacturer.

[ Mac engineers lament Apple's poor enterprise support. | Recent Apple rumors aren't good news for CIOs. ]

"A product like this can appeal to the markets that Apple has never been good at," such as countries where Apple computers have little presence, says Gartner analyst Ken Dulaney. "A big, clamshell version of the iPhone can get Apple into lower-cost markets."

There's no question that cost-conscious companies and consumers are hedging their bets when it comes to buying Macs. Market researcher NPD Group reported that Mac sales fell 16 percent last month, while overall PC sales rose by 22 percent, spurred by strong sales of the revolutionary low-cost netbooks.

Netbooks, which started out as low-cost education PCs, began expanding into other markets last year. That success has no doubt caught Apple's eye. "Apple likes to see a large market with a high degree of differentiation, come in and command it," Dulaney says.

It's a good market for Apple, says Dulaney, since many netbooks have embedded 3G and are mostly used for browsing, email and instant messaging, which basically makes them big smartphones. This bodes well for Apple to ride the iPhone phenomenon with a product that has a higher price point than the iPhone itself. Dulaney, though, figures Apple will have a tough time breaking the netbook category's critical $500 barrier. Since a netbook's key selling point is low cost, this could hinder adoption of an Apple netbook.

Business use of netbooks is still less than 10 percent of PC units shipped, according to Gartner. The 10-inch notebooks can be used for some office productivity, Dulaney explains, but they aren't qualified for mainstream adoption because desktop applications are difficult to view on such small screens and typing becomes laborious. Moreover, netbooks are closely related to tablet PCs, which are found only in niche markets like field service operations and medical care—not core Apple markets like advertising, publishing and other creative services.

Like the iPhone, an Apple netbook will probably have just enough enterprise ingredients to get into the doors of some companies. "They'll do just enough to slip through the minimum barriers for security that they need to do something simple like email," Dulaney says, "but not enough to dominate in any way."

Apple's lack of affinity for the enterprise will continue to stymie acceptance of its products among CIOs. The Enterprise Desktop Alliance surveyed more than 300 IT managers recently, and the consortium of Mac vendors found that a vast majority see room for improvement in the current management capabilities for Macs in the enterprise.

Apple didn't even extend an invitation to Dulaney for its iPhone OS 3.0 event earlier this week, which upset the enterprise analyst. "They said it wasn't relevant to the enterprise," he says. "Everything is relevant to the enterprise these days."