Many PC analysts thought that the "netbook" would be a toy. Sitting someplace between regular laptops and smartphones, the little PCs would not have the processing power and screen sizes to be useful to most consumers.

The netbook does have one advantage. Most cost about $300. But, experts assumed that the products would be a second computer that individuals and businesses would use for travel or taking to meetings for keeping notes and checking the internet.

As it turns out, netbooks have perfectly adequate processing power and their screens can even be used by the elderly as long as they use reading glasses. At low prices points, a netbook is an ideal way to replace an aging PC during a recession.

Accordng to The New York Times, "The only bright spot in the PC industry is netbooks. Analysts at the Gartner research company said shipments rose to 4.4 million devices in the third quarter of 2008, from 500,000 units in the first quarter of last year."

While no one in the PC, software, or processor industries is saying, is that making money on netbooks has to be a challenge. How much margin can there be in a machine that costs less to buy than many cellphones.

The PC industry has to face up to the fact that people who can’t afford to drive use bicycles. And, usually they work just fine.

Margins at companies like Intel (INTC), AMD (AMD), HP (HPQ), Dell (DELL), and Microsoft (MSFT) are about to be squeezed.

Douglas A. McIntyre

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