Will India’s $10 Laptop Kill PC Business? (DELL, HPQ, AAPL, MSFT, RHT)

The massive power in the newest of low-cost PC’s is killing the computer companies  PC’s are becoming about the same as refrigerators and toasters.  And now the $10 laptop is on the verge of  being launched in India.  We have read about this for well about two years, and it almost seems too good to be true…. 

Should companies such as Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ) be shivering?  What about Microsoft (NASDAQ: MSFT) where one cheap version of Windows or a student version of MS Office costs multiples of this?  What about the premium computers sold by Apple (NASDAQ: AAPL).

A $10 laptop is a scary notion for all of these producers, but thereare caveats galore.  First, if you have seen any of thesesuper-cheap laptops and even the notebooks for the "One Laptop PerChild" which run $100 or so (and may cost $200) they are not pretty.  They also have limited technology.  But when you step up into the realm of the sub-$500 in the U.S. today, we have discussed how high-power and low-priced computing power might be a possible killer of the PC business.

At $10, or $20, or whatever, these are bare bones PC’s.  We do not have a handle on all the details, but the talk is 2GBof RAM, a WiFi connection, and probably a stripped down O/S running onof the most basic Linux suites.  No, Red Hat (NYSE: RHT) is not likelygoing to be the Linux winner from India as its software packages alsocost much more than this laptop would cost. At Best Buy, Ubuntu Linux O/S/ costs $19.99.

Will these laptops have any compatibility problems?  The answer is ashort "Hell Yes!" for anyone wondering.  We do not know if they will bepowerful enough to even adequately run OpenOffice let alone other software, so these laptopswill probably be without any Microsoft programs at all.

Some are speculating that these will sold in the U.S., but theshipping alone would probably cost more than the entire unit.  It needsto be understood that these $10 laptops are meant for the eductionmarket and it looks like the real cost here is above that number and isbeing subsidized. 

Retailers also won’t want to kill their margins by selling a laptop for$25 or $50 or even $100.  Best Buy currently sells one netbook AcerAspireOne unit for $284.99, but most of these new netbooks cost about $399 before you add a single thing on them.  In desktops, BestBuy lists an eMachines desktop PC for $299.99 but that is also for thebare bone PC.  On the regular laptops, Best Buy also has an H-P machinevia Compaq and an Acer Aspire unit with each priced at $349.99.  Again,bare bones before adding anything.  Best Buy is far from the only game in town for where you can buy cheapPC’s. 

There are many spots which sell PC’s for far less.You can buy mini-laptops (netbooks) directly from Dell for $299 or $399.  But this is for cause and effect to show how this would compare today.A $10 laptop is not going to be here in the U.S., at least not on afair basis or not on a non-subsidized model.  You can already get cheapPC’s for close to $100 if you are willing to go through certainsubscription services. 

The $10 laptop will probably be fine for the Indian market.  Throw inthe Chinese market too.  And all of Africa and the Pacific Rim.  This is a total introductory model.  Youwouldn’t want to be sporting one in a business meeting nor would you likely want to run any serious applications on them.  Again, this is just an introductory bare bones model that looks intended for school children. 

But you know you what this and other trends, particularly the horribleeconomy and softening consumer spending, are going to do prices of computers.And of all the technology, software, and peripherals inside them.

Jon C. Ogg
February 2, 2009