'Smartbooks to Join Crowded Computer Market

The 2010 Consumer Electronics Show will be a coming-out party for a new breed of ultra-small laptops that act more like smart phones—designed to be always on and connected to the Internet via 3G cellular networks, ready to call up a Web page or post an update on Twitter.

Promoters of the new devices have been pushing the term "smartbooks," partly to distinguish them from the low-end portables called netbooks that have been the hottest thing in the PC industry over the past two years.

But there are unanswered questions about features and pricing for the new hardware, leaving the possibility that consumers could get confused with existing netbooks.

Smartbooks are expected to carry lower prices than netbooks—which can be found for as little as $250 these days. Most smartbooks are also being designed to have built-in cellular connections, so they are more likely to be sold at subsidized prices by cellular carriers along with data plans.

Although smartbooks will carry lower price tags, backers say they could generate higher profit margins for manufacturers because of savings on chips and operating systems.

Unlike netbooks and most other laptops, smartbooks don't use x86 microprocessors from IntelAdvanced Micro Devices Inc., nor popular versions of Microsoft Corp.'s Windows operating system. Corp.

The most vocal proponents of smartbooks, indeed, are makers of chips for cellphones that are angling for a new market. They include Qualcomm Inc., Nvidia Corp., Freescale Semiconductor Inc. and Marvell Technology Group Ltd.—which license microprocessor designs from ARM Holdings PLC and combine it with their own technology.

ARM-based chips tend to draw less power than x86 chips, helping to extend battery life. They also carry lower price tags; with savings on chips and low-cost operating systems, backers say smartbooks could generate higher profit margins for manufacturers.

Industry executives predict a wide variety of smartbook designs, some that look like conventional laptops and others that are much different.

"I think you'll be amazed at what can be done when you're not boxed in by the rules of innovation dictated by Intel and Microsoft," says Henri Richard, Freescale's senior vice president and chief sales and marketing officer.

Most smartbooks, which are expected to be built by both PC makers as well as manufacturers of cellphones and consumer-electronics, will run versions of the Linux operating system and low-cost chips based on designs licensed by ARM Holdings PLC.

Windows or x86 chips have not proven to be essential in cellphones, nor in some other wireless devices. Amazon.com Inc.'s hit Kindle and other electronic-reader devices use ARM chips and internally developed software, for example. Apple Inc., which uses ARM chips in its iPhone, is expected to make waves over the next few months with a tablet-style portable that will use the same chip technology. (Apple has declined to comment on any such product).

The resemblance of many smartbooks to netbooks may lead consumers to assume smartbooks can handle the same computing tasks. But smartbooks running Linux or its offshoots, such as Google Inc.'s Android, won't run applications like Microsoft Word or Apple's iTunes. Early netbooks that ran Linux ran into customer resistance and were quickly replaced with Windows-based models.

"Customers will likely continue to choose Windows netbook PCs over Linux smartbooks for these same reasons," predicts Ben Rudolph, a Microsoft senior manager for Windows.

Assuming smartbooks cost $200 or so, the new hardware will wind up facing uphill competition against products such as smart phones and portable gaming devices that are well understood, argues Patrick Moorhead, AMD's vice president of advanced marketing. Companies that choose to offer both netbooks and smartbooks face a particularly tricky marketing effort.

"It's too big to be a phone and too small for easy content creation," says Roger Kay, a market researcher with Endpoint Technologies Associates. "There has been little evidence that people really like that category."

Competition may also be tough. Intel recently introduced a new, more-compact version of its Atom chip for netbooks, which is expected to prompt a flurry of low-priced models that could reduce the appeal of smartbooks. Netbook shipments doubled in 2009 to 33.3 million units and should grow another 19% in 2010, market research DisplaySearch estimates.

"Netbooks have just been a phenomenon," says Thomas Kilroy, an Intel vice president who is general manager of its sales and marketing group.

Delays in delivering smartbooks—some of which had been expected to be available in the fourth quarter—haven't helped their image. So far, manufacturers have mainly offered pocket-sized devices with ARM chips, such as Nokia Corp.'s N900 and Sharp Corp.'s PC-Z1 Netwalker, rather than a full-sized keyboard that is sometimes considered a defining attribute of smartbooks. Mr. Richard of Freescale expects that many designs will remain under wraps until mid-2010.

Reasons for the delays include the job of adapting some key software—particularly Adobe Systems Inc.'s Flash, which is needed to play popular video sites such as YouTube.

"The experience didn't live up to what people expected," says Mike Rayfield, general manager of Nvidia's mobile business.

But there are signs of movement. Qualcomm Chief Executive Paul Jacobs, at a meeting with analysts in November, showed an ultra-thin red portable by Lenovo Group Ltd. running Flash and high-definition video, which he proclaimed to be the first true smartbook.

Lenovo won't provide any details about the device, which is expected to be formally unveiled at CES. But Peter Gaucher, executive director of advanced technologies for the Chinese PC maker, argues that a new generation of young users is not nearly so locked into the PC environment as their elders—moving easily among smart phones and other gadgets that are designed to do fewer things well.

"As costs come down, people are going to use more purpose-built devices," Mr. Gaucher predicts.

Smartbook supporters also say that critics underestimate the appeal of a device that is always on and connected. A greater proportion of the forthcoming devices are expected to come with built-in 3G networking than netbooks; short-range Wi-Fi connections are expected to be common to both.

So email is more likely to be pushed automatically to smartbooks rather than requiring users to log on to the Internet and fetch messages. Similarly, calling up movie times, weather forecasts and posting to Twitter and Facebook will be a matter of seconds, executives in the smartbook camp say.

Some wireless carriers, eager to expand beyond voice services, already offer netbooks at a subsidized price along with a 3G service plan. For example, AT&T Inc. offers Acer Inc.'s Aspire One netbook for $149.99. Smartbook backers expect that business model to become much more prevalent with the new hardware, which could allow carriers to offer even lower prices.

"We see subsidy being a key factor for the launch of smartbooks," says Luis Peneda, a Qualcomm senior vice president of marketing and product management. Qualcomm's Mr. Jacobs said AT&T would be supporting the launch of Lenovo's smartbook; a spokesman for the carrier declined comment.

by Wall Street Journal