Why Moblin won't save the netbook from Microsoft

Bill Snyder says Redmond is shaping the netbook for its own ends

I'd like to believe that Intel and the open source Moblin platform (based on Linux) for mobile devices will stop Microsoft's nakedly monopolistic ploy to slow netbook sales. But they won't. No matter what you may have read, Moblin is part of Intel's strategic move into the smartphone market, not a ploy to challenge Microsoft's hold on the netbook operating system market. Intel, which is facing increasing scrutiny from regulators in Europe and the United States, isn't in a position to tell PC makers what to do with its chips. And PC makers, who are terrified that netbooks will cannibalise sales of more profitable true notebooks, won't act either. So everyone in the industry "is happy to let Microsoft do the dirty work," says Nathan Brookwood, a principal analyst at Insight64.

There's another issue as well: Linux is simply not a good fit for the netbook market. People who buy netbooks are looking to save a buck, not run away from the applications they've used for years. Asus tried to sell Linux-based notebooks last year and fell flat on its face. To be fair, the Eee PC had others problems as well, but it was pretty obvious that consumers didn't want to mess with Linux. And Moblin is Linux — mobile Linux, in fact. As my colleague Neil McAllister argued recently, desktop Linux may have lost its chance. After all, if Red Hat and Novell aren't ready to put their full faith behind Linux on the desktop, who will? I'm sorry to say it, but the answer is no one.

Microsoft's ploy is pretty simple: The Redmonders are redefining the netbook. Today, a netbook is a netbook as long as the screen is no larger than 12.1 inches. Any bigger, it's a laptop. Under Microsoft's scheme (enforced by what it charges PC makers for the OS for each type of device), that maximum screen size is reportedly going to change to a maximum size of 10.2 inches. Remember: The screen size also determines the size of the keyboard, so a smaller screen means a smaller keyboard — and that's a very big deal for anyone that wants to do a significant amount of typing. If you're a hardware vendor and your device fits within Microsoft's restrictions, you'll qualify for the lower-cost netbook edition of Windows 7. If not, you have to buy one of the pricier Windows 7 versions and pass the cost on to your customers. That's a pretty good deal for Microsoft: Wave the magic wand of tiered pricing and your margins go right back up. Under other circumstances, the OEMs would complain. But because netbooks are increasingly costing them sales of higher-priced laptops, they're not likely to push back. Indeed, Morgan Stanley analyst Kathryn Huberty maintains that while netbooks will cut laptop sales by about 10% this year, the impact on revenue is much higher, since average selling prices are some 50% lower. Netbook sales remind me of the wonderful Sorcerer's Apprentice sequence in "Fantasia" in which Mickey Mouse creates an army of walking brooms to do his work, only to watch in horror as they run amok. The original impetus behind the netbook was to build a device that would supplement a standard PC. But more and more people are using them instead of a pricier laptop. What a bummer, if you're Hewlett-Packard or Dell. So if Microsoft wants to stop those walking brooms, no one (except the customer, that is) is going to complain. Intel's game is more complex, as Brookwood explained to me. Intel sells a Core Duo laptop chip that costs roughly US$25 to make for about $75. The much smaller Atom sells for just $25, but costs only $5 to make. It's better to make a $50 profit than a $20 profit, of course, but because the margins on the Atom are so good, Intel still makes out pretty well — but not well enough to be happy about plummeting laptop sales. Instead, the giant chipmaker will push Moblin and the Atom into the smartphone market. Because the Atom is an x86 processor, it will run any application that gets ported over to Linux, a pretty good selling point against the ARM chip that today is the smartphone chip darling.

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