Robust sales of Apple?s iPad and competing tablets from manufacturers such as Samsung, Motorola, Dell, Research In Motion and Hewlett-Packard may be killing off 2009?s hot computing device, the netbook.

Tablets have been one of the most popular gifts lately, with Apple?s marketing push, the range of available content and the touchscreen interface capturing consumers? attention. Market research firm NPD reported that during this past holiday season, retail sales of netbook computers in the United States fell 38 percent compared to the previous year.

?The NPD data about netbooks being down year-over-year is due to a couple of factors,? said Ross Rubin, NPD Group, New York. ?The iPad has certainly been one of them, but of course one should consider that had Apple entered the netbook market, they would likely have grabbed some sort of market share in the category.

?The entry of a major player in the notebook segment with a 10-inch screen size could change things, but current market share reflects consumers? preference for tablets rather than netbooks,? he said.

Profit margin factor
Other computer-makers have put pressure on netbooks by releasing lower-priced PCs with larger screens for not much more of a premium than netbooks, which bring the manufacturers larger margins.

Mr. Rubin said that for all of the talk about competition between netbooks and tablets, and while there are a fair number of similar tasks performed on both devices, they are really not perfect substitutes for one other.

?A netbook is not a strong platform for video-playing, and it is not as easy to use in certain situations such as on an exercise machine, whereas the tablet tends to be lacking in software for things like word processing and productivity apps,? Mr. Rubin said.

?Tablets can?t be used with many peripherals that work with Windows, but their instant-on function and excellent battery life are some things that netbooks have not had,? he said.

Among the challenges facing netbooks is a fundamental one: It is not a very profitable market segment for manufacturers.

?I haven?t seen companies invest a lot in improving netbooks to avoid cannibalization of more expensive products,? Mr. Rubin said. ?The focus on keeping them as a second PC?that is driving a lot of the competition with tablets and limiting some of the potential of netbooks.?

There are clearly a lot of new companies entering the tablet space, as well as an update to the iPad likely to appear later this year.

Prior to netbooks, the sub-10-inch computing category was almost negligible in the U.S. and products were very expensive, often more than $1,000.

Netbooks have really helped to expand that segment of the market, per NPD.

?Even if the sub-10-inch segment is only 5 percent of the overall computing market, it is still exponentially greater than what it was before the intro of the netbook,? Mr. Rubin said. ?There is an opportunity to combine the best elements of the netbook and the tablet.

?The limitations of the netbook are imposed by the Windows OS,? he said. ?As we see companies willing to put an operating system like Android or webOS on a clamshell-like device, carriers will be more open to that due to the success of products like the iPad.

?A netbook with a keyboard plus strong battery life and a touchscreen could be very appealing.?

Future for netbooks?
The declining market share of netbooks is consistent with the trends eMarketer has seen since the beginning of last year.

The popularity of tablets and netbooks really varies a lot by market. Developed countries are a lot less price-sensitive than developing countries, where the choice of computer is an either/or choice, whereas the U.S. is a both/and choice.

The tablet is not going to be the primary computing device for most people in the U.S. It is primarily used for leisure as a media consumption device.

The tradeoffs that come with a netbook are more easily overlooked in the developing world.

?Tablets have been squeezing market share from netbooks in the U.S. certainly,? said Noah Elkin, eMarketer, New York. ?The most aggressive thing Apple did was the way they priced the iPad, which made it difficult for other tablet manufacturers to compete, and also put pressure on both netbook and even notebook manufacturers.

?Part of it is the appeal of the tablet?s form factor?the netbook looks sort of dowdy by comparison,? he said. ?Although tablets have started to steal sales from both netbooks and notebooks, they do serve slightly different purposes?they are not exactly interchangeable.

?From a media consumption perspective, a tablet is more appealing, but if you?re looking for actual work purposes, netbooks are still a little bit more robust in that department, at least until enterprise software for tablets catches up.?

Strategy Analytics' Neil Mawston offered the following take:

Pen-controlled tablet PCs have been on sale for almost a decade, but it was Apple's innovative use of finger-operated touchscreens that opened up a whole new growth market for tablets in 2010.

The fast boot-up time of the Apple platform, elegant hardware design and the intuitive nature of its sweep-and-touch displays are convincing many consumers to drift away from keyboards and trackpads in Microsoft netbooks and low-end laptops.

A key challenge for tablets is determining just how big the market will be beyond the iPad.

Apple has a dedicated fan base and it is likely to sell millions of tablets this year, but it is not yet clear whether consumers will show quite the same enthusiasm for other brands.