The cheap, sub-notebook class gets sub-classed... and more expensive

I'm swamped today but happened to catch a little news in Google Reader after lunch. Is it just me or are the laptop companies trying to kill the newest sub-notebook market before it really hits critical mass? Don't get me wrong: I love what was started by the OLPC and the Asus EEE PC. It just appears to me that folks are trying to cash in on it by maximizing profits in the early stages. Here's what I've seen:

• The OLPC was planned to be around $100 or so and turned into a $200 machine. 100% increase.
• The Eee PC 701 was looking to be a $200 machine and quickly turned into a $400 purchase. Again, a 100% increase.
• The 901 Eee PC offers a little more storage, slightly bigger display and higher resolution. $549 is the pre-order price on a device that shouldn't require massive retooling from a build standpoint. Yet, the new features will cost you almost 40% more than the old model.
• HP's Mini is a nice machine that might have a wee bit more power than these competitors and it certainly has a beautiful screen and more usable keyboard. Based on the price, "you won't even need to consider this purchase". It starts at $499 and the highest-end XP model is just over $800. Who's dropping $800 without blinking? Even at the mid-range, you're looking at $600 or so... still not a "whim purchase".
• The MSI Wind is forthcoming as well: $610 is the pre-order price.

Each of these devices offers different feature sets, sizes and weights to be sure. It almost seems to me that folks are trying to create sub-classes of the sub-notebook class though. I also see prices trending up, not down. There's cheap and functional and there's expensive and faster. What happened to the $200 and $300 machines? Are the components truly driving the prices up or is the profit margins that are increasing?

Comments

[TateJ]

Interesting observations Kevin. I wonder how the sales of the EEEPC are doing now that it has competition.

[James Kendrick]

I think it's more a case of the market speaking and saying "we want more functionality". This does (and always will) cost more to stick in these little cases.

[Kevin C. Tofel]

TateJ, I'm willing to bet that the most successful selling unit out of the one's I mentioned above is the original Asus Eee PC followed by the next model Asus, strictly due to price. If Dell can come in at or under $400, then I might change my mind.

Right now, the original Eee PC is the Commodore 64 of this era IMO. ;)

[Stu Kim]

I'm with TateJ. These manufacturers most likely are looking at the market research and concluding that consumers want more and are willing to pay more, instead of taking a more common sense approach and understanding why the sub-notebook class attracted so much attention at the start - price and basic functionality for the masses.

[Frank McPherson]

I disagree James. I think Kevin is on to something, these companies are trying to make more profit. People were attracted to the Eee PC because of the combination of a low price and what they got for that price. If the market wanted more features they wouldn't have bought the Eee. I think price is the deciding factor and I think the market is saying they are willing to sacrifice some features for an attractive price.

From these vendor's standpoint, I have to wonder whether it makes sense to offer so many different models at so many different price points like HP is trying.

[nomo]

I suspect the initial price targets were market-driven to reach sales projections in a highly price-sensitive environment. But even the most successful sub-notebooks are niche products with limited production. Low-price/low-volume is a tough way to make money.

Device makers seem to be struggling to find a successful combination of design parameters, price, and customer interest. There are dozens of UMPC options available but none have broken through yet. Many core users love their older 10" Sony and Fujitsu laptops, but prices were relatively high, sales were minimal, and both manufacturers moved away from this market.

[cr0ft]

Frankly, lumping in the OLPC project into this comparison doesn't fly with me. Sure, say what you want about that and how well it worked, but I'm sure in an ideal world they would have loved to get it down to $100. The fact that they couldn't achieve that is regrettable but I don't think there is any price-hike conspiracy to blame for it.

In truth I'm not even sure the OLPC and the Eee and these others are in the same class. The design idea behind them sure is not the same, and I think I know which would be more suitable for a bunch of kids in some developing country, at least.

As for the price trend, if it indeed trends up, I'm thinking James may have a point about where things are headed. Really cheap means really weak, and I suspect many people who are buying these devices are doing it for the geek factor and fun more than anything else and want "small and cheap - as long as it's cool too, otherwise don't bother me."

[Mike Cane]

>>>Right now, the original Eee PC is the Commodore 64 of this era IMO. ;)

Gee, where have I heard THAT before?
http://mikecane2008.wordpress.com/2008/04/15/is-the-asus-eeepc-the-new-commodore-64/

Seriously, though, I was going to write about this too. Still am, but with a twist (no hint for YOU, Fiend! Read the blog!).

When I saw those escalating prices my eyes popped. In one way, it's all just wrong. In other way ... well, that's my upcoming post.

[bluespapa]

It strikes me that these things come in waves. The problem is they throw together lousy products, and instead of the best being improved, the OEMs just as suddenly drop a good line before it becomes more cost effective to ramp up, so now there aren't any 8.9" active digitizing screens, and Motion never offered theirs with more than a 40 gig HDD. Sony had a growing line of Palm based PIMs, and then dropped them. If you go look at cheap calculators, they come thrown together in every conceivable plastic box, but do only basic functions.

I hope enough make a profit to attract more options, and more whiz bang, but also bring ideas and variety to the portable end of the market.

[Nate]

I would not have purchased the Eee if it was released at the current prices.

However, after using the Eee for six months, it gave me a pretty good idea of what I really wanted in my extremely portable machine. HP just happened to release a machine that hit on all of my foibles with the Eee. The price wasn't the greatest, but because I knew it hit on what I knew was important to me, it was worth the difference between it an the new Eee Pc.

So, in my case, it was worth it to purchase low, figure things out, and then purchase again at a little higher cost. At these prices, I was still able to buy two machines at significantly smaller cost than one classically priced subnote.

[jhall]

To me it is about value. What you get for the amount of money you spend. I just bought a eee pc 701. I would like to have bought the fujitsu p1620, but for $2500 it does not have the value I am lookng for. I need a web, video, podcast, email machine. For $399.00 the eee pc 701 hits the sweet spot. The value is there. A PDA cost around $300 and a laptop cost around $500.00, but the eee pc cost $399.00. This model hits the sweet spot of cost vs. function, so this machine is valuable. If the price continues to rise you are in the better spec laptop range. The more units you sell the lower the price can be. The whole idea of the umpc was to come in at a $500.00 price point. They were to use the inexpensive 7" portable dvd display and lower powered processor. Guns and butter, the classic economic delima. Cost vs function. You can't have it all even if you want it.

[moog_pt]

Has anyone taken the US $ devaluation into account?

[Travis]

The new EeePC 900 has more than twice the SSD space of my EeePC 702 8G and is only $50 more and it has a bigger screen. I like my 701 and will buy a 900 later this year unless HP gets it together. My sig from eeeuser.com.

Pearl EeePC 702 8G 7C 2G RAM
Full XP Home SP2 8G SDHC EeeCtl (custom) & WinMover
External BU-353 USB GPS w/MS Streets & Trips 2008
WD Passport 120GB HDD

[Mike Cane]

>>>The new EeePC 900 has more than twice the SSD space of my EeePC 702 8G and is only $50 more

At first I wondered what you meant, then I hit upon that 8G designation. So you went high-end to begin with for the EeePC. For someone like me looking at the low end (OK, middle; 2G is low), it's $150 more!

[Mike Cane]

Hahaha, I thwart you AGAIN, Fiends Kendrick and Tofel! For I have now fondled an hp Mini Note! Weep, you evil duo! Weeeeeeep, I command thee!

http://mikecane2008.wordpress.com/2008/05/10/micro-fondles-hp-mini-htc-shift-asus-eeepc/

[Ben]

I don't believe ASUS is discontinuing the 700 series, so if you really want small and cheap, then you can go ahead and buy the 700 series at the lower price.

Many people (maybe after buying the 700) loved the format, but not the short-comings (especially screen-size, lack of memory), so they're happy to pay a little extra for the 900 series.

The problem is, as usual, it seems some people want 'everything' but aren't prepared to pay for it. In which case, just be patient, and prices will probably come down in the future.

Anyway, the evidence of queues and selling out on the launch of the 900 doesn't seem to indicate that ASUS is pricing itself out of the market.

[Virtuous]

The original low prices were never realistic to begin with. After using an underpowered UMPC for several months I'm returning to a full-size no-compromise laptop. The eee PC and Mini Note strike me as toys more than anything else.

[Jamison]

Low prices are introduced to the market to get you addicted, then raise the price. Same situation with buying online when that was new in the early 90s... and with street drugs I guess...