While consumer spending is down, PC sales have continued to grow in 2008. Much of this growth is being credited to the rapid growth of the netbook market. “Netbooks are the biggest thing to hit the PC industry in over a decade,” said IDC analyst Bob O’Donnell. Asus's Eee PC, launched in 2007, was the beginning of netbooks’ popularity. The small, ultra-light netbooks (9-10 inch screens, 2-3t pounds) are designed mainly for web access and office productivity applications, and sell in the $350-$500 (and falling) range.

With less computing power than standard laptops, netbooks generally run Linux or Windows XP. Microsoft says that Windows 7 will run on netbooks.

Netbook sales should represent 7.3 percent of the laptop market in 2008, with 10.8 sales, according to the Wall Street Journal. Sales are expected to reach 10 percent in 2009. IDC expects desktop sales to be down in the forth quarter, but notebook sales are expected to be up 29 percent. Many of Amazon’s bestselling computers are netbooks.

iSuppli predicts that netbooks will make up 12 percent of the PC market in 2012.

Netbook sales are much higher in Europe, the Middle East, and Africa. They make up 10% of the European market; netbook sales are expected to double there this quarter.

There is a concern that netbooks will cannibalize the PC market, as consumers turn to low-priced netbooks instead of more profitable PCs and laptops. Right now, more than a third of laptop sales represent PC and laptop replacements.

PC World’s Mike Elgan writes that netbooks could sell for as low $99 dollars as mobile broadband providers subsidize them for contract purchasers, as with mobile phones, a model popular in Europe and Asia.

HP’s entry this week into the consumer netbook market with the HP Mini 1000 is expected to accelerate price drops. Asus says it will release a $200 Eee PC by the end of 2009.

By Mark Alvarez