Ultra-hyped ultrabooks ultra-flopped in 2012

Just 12 months ago, the ultrabook was widely regarded as the PC market's savior. Since then, it's become more of a punch line.

The ultrabook made a splash at CES 2012 with its ultra-thin form factor, touch screen and longer battery life. Intel touted the ultrabook as the device that would lead the revival of the PC against the onslaught of the tablet. Instead, a series of missteps and a global decline in PC sales kept the ultrabook from fulfilling its potential.

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The question now is whether the Ultrabook can bounce back, or if ultra-thin laptops will be squeezed out of the PC market.

In early 2012, analyst firm IHS iSuppli forecast 22 million ultrabook sales by the end of the year. At the time, that prediction was relatively modest. Roughly a year ago, Intel claimed ultrabooks would account for 40% of the laptop PC market by the end of 2012. The company had even set aside a $300 million marketing fund to help meet these expectations.

By October, IHS iSuppli released a new report estimating that ultrabook shipments - not sales - had only reached 10.3 million units. The firm also reduced its prediction for 2013 from 61 million ultrabook sales to 44 million.

However bleak the current situation may seem, Craig Stice, senior principal analyst at IHS iSuppli, says it's too soon to call the ultrabook a failure. Intel's lofty predictions forced many to set the bar pretty high for the ultrabook, Stice says. Falling short of that mark made the ultrabook's struggles stand out in an otherwise equally underperforming PC market.

"I would say it performed as well as the PC market performed as a whole, which was sluggish," Stice says. "The PC market in general - it's looking like 2012 is going to be a down year for computers in general. I'm not saying that ultrabooks can't rebound, because they were pretty much new in 2012, but getting people out and purchasing PCs in general, it was a difficult year for it.

IHS iSuppli estimates that PC shipments declined from 352.8 million units in 2011 to 348.7 million in 2012. It was the first time since 2001 that PC shipments have declined year-over-year.

Pricing was a main deterrent to ultrabook sales last year, Stice says. Early ultrabooks were priced in the $1,000 range. Considering that consumers, many of whom use their devices mostly for web apps, could purchase tablets in the $200 to $500 range, Stice says it simply doesn't make sense for them to pay twice as much for an ultrabook.

Moving into 2013, Stice says ultrabook pricing is beginning to creep down to that competitive level. That's because the past year can serve as a research period for manufacturers, he says. Many of the $1,000 devices were what Stice called "model units" of ultrabooks, and as such they were adorned with "all the bells and whistles."

As manufacturers examine customer feedback and conduct more research on how people are using ultrabooks, they'll be able to reshape the devices and build new ones without some of the more expensive components and parts. This will enable manufacturers to drop the price, Stice says.

Battle of the ultrabooks

In addition to pricing, Stice says PC manufacturers misfired when it came to marketing the devices. While "ultrabook" was an inescapable industry buzzword after the technology received praise at Computex and CES, manufacturers failed to reach the customers who live outside the technology world, Stice says.

This has already started to change, with television commercials introducing the device and its capabilities to mainstream markets. As the ultrabook pushes forward, Intel and PC manufacturers will need to focus on a combination of factors if they're going to successfully convince customers that they're worth buying, Stice says.

Manufacturers would do well to shed some light on their hybrid, or convertible, ultrabooks, which have the best opportunity to appeal to broad markets, Stice says. Those in the market for a notebook computer have most likely come into contact with a touchscreen by this point, or are at least familiar with the benefits of a tablet. However, they've been conditioned to use a QWERTY keyboard for years, and will be more comfortable typing long emails or creating documents in that form factor.

With convertible touchscreen ultrabooks, manufacturers have the opportunity to tell consumers that they don't need to choose between a tablet and a notebook, and can get both with one purchase, Stice says.

Intel appears to have recognized this, scheduling an event at this week's CES 2013 specifically to showcase convertible ultrabooks enabled with touchscreen navigation.

In order for Intel to successfully turn consumers onto touch-enabled convertible ultrabooks, Stice says Microsoft will need to chip in and help educate the public on Windows 8. As a touchscreen-compatible OS, Windows 8 bridged the gap between ultrabooks and the touchscreen, Stice says. If users are going to be expected to navigate the devices, they'll need to become familiar with the Windows 8 interface.

"So now that we've seen Windows 8 out, we're starting to see the advertisements and getting the external kind of push into the marketplace. And I think that needs to continue," Stice says. "They have to continue to give an education of what ultrabook is, how different it is, not just the fact that it's thin and light and small, but what else is out there."

For consumer markets, the ultrabook's battery life is one of the features that will need to be emphasized, simply because it's an easy way to portray the devices' advantage over tablets or other notebooks, Stice says.

"People understand it. It's not a technical term. Seven hours is better than six hours. That catches your eye," Stice says. "If [they're] looking at a choice between a media tablet and now they see this new PC that has fairly comparable battery life or better battery life, that will catch their eye."

As for the corporate markets, Stice says ultrabooks have a great opportunity to capitalize on an increasingly mobile workforce. As the bring-your-own-device (BYOD) approach to corporate mobility has become more common, users have realized what form factors are more conducive to their work day. Those who bought an iPad during its early hype, for example, may prefer the ability to convert the tablet into a notebook when it comes time to upgrade, Stice says.

"There are some advantages that an x86 convertible might have, as far as supporting legacy programs, being fully compatible with what they may be using in their cube or on their desktop or whatever the case may be," Stice says. "Not to say that the iPad isn't, but being able to work on a keyboard and do full-fledged content work on a convertible certainly could be attractive to a lot of users."

If nothing else, the ultrabook's first year on the market will go down as the genesis for further innovation in the PC market, Stice says. Whether the ultra-thin, power-efficient device sold as well as it should have in its first year will be less relevant in the future, when new devices will be designed with inspiration from the early ultrabook's features. Even if the name ultrabook doesn't survive, its influence will remain, Stice says.

"Ultimately that was really what Intel was trying to do, was drive the industry into new innovation and new form factors that are going to better compete. Are there still going to be the brick-style, typical notebooks that we all know and love today? Possibly and likely, from a pricing standpoint those are still relatively inexpensive," Stice says. "But I think going forward, I think we're going to see a lot of push into these thin type of form factors. Whether or not they're branded ultrabook kind of remains to be seen."

Colin Neagle covers emerging technologies and the startup scene for Network World. Follow him on Twitter https://twitter.com/#!/ntwrkwrldneagle and keep up with the Microsoft, Cisco and Open Source community blogs. Colin's email address is cneagle@nww.com.

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