Netbook Pioneer Asustek Enters the iPad Age - Busi

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Netbook Pioneer Asustek Enters the iPad Age Asustek is introducing tablets in response on the Apple blockbuster but still sees a long term for netbooks. Up to now, traders aren't convinced
By
Bruce Einhorn and
Tim Culpan

(Corrects the spelling of Asustek in the headline)
Tiny computers are good to Asustek. The Taiwanese organization in 2007 released the primary netbook, people low-priced mini-laptops that have been the Laptop industry's fastest-growing item for your past two years. Netbooks now signify virtually 40 percent with the Asus brand's product sales and also have been the major issue in supporting Asustek tie Lenovo since the world's No. five transportable Computer company, in accordance to researcher Global Info Corp.
Now it appears such as the netbook progress engine is dropping steam. Netbooks' share of the worldwide Laptop market place will almost certainly be flat this year at 12 percent, IDC estimates. Rather, buyers are flocking to tablets including Apple's (AAPL) iPad, which give a lot of the advantages of netbooks. For Asustek, that means making a big push into tablets while wanting to persuade firms and customers that you'll find even now positive aspects to netbooks.
On May possibly 31, Asustek unveiled its 1st weapons in the battle against the iPad: the Eee Pad along with the Eee Tablet. Like Apple's system, the Eee Pad—available next winter—will have a touchscreen, an embedded keyboard, and videoconferencing capability. Unlike the iPad, the Asus machine will sport an Intel (INTC) processor and use the Windows 7 operating system. The Eee Tablet, to hit the market place in early 2011, is an electronic book reader with a touchscreen and built-in camera that allows users to write notes on photos. The new gadgets could be "key drivers for Asustek's product sales and earnings progress inside the coming decades," KGI Securities analyst Angela Hsiang wrote in a June 1 report.
Asustek will have plenty of competition, even aside from the iPad. Dell (DELL) has launched a mini-tablet called the Streak,Office Professional Plus 2010 X86, and almost every other Pc maker has a tablet within the works, though some have delayed launches inside the wake in the iPad. Although the new Asus machines will hit stores before most with the competition,Office 2007 Professional Sale, traders clearly have doubts about Asustek's strategy. Its Taipei-listed shares dropped 18 percent this 12 months through Might 17, when stock sales were suspended pending the upcoming spinoff in the company's manufacturing arm. One investor worry is that Asustek can't give as several apps as Apple can. "They have a very good merchandise but the environment is not ready; there's nevertheless not enough content,Office Standard," says Robert Cheng,Windows 7 X86, an analyst in Taipei with Credit Suisse (CS). Another problem is that the Eee Pad will have about six hours of battery life, four hours less than the iPad.
Asustek CEO Jerry Shen believes he nevertheless can tap a vast corporate market for netbooks. The business is tinkering with design, moving away from the current clamshell look to sleeker one-piece models—a kind of tablet shape but with a physical keyboard. Asustek "will have a lot of different types of netbooks that can nevertheless provide a better user experience" than tablets, says Shen.
To hedge towards a large decline in netbook popularity,Microsoft 2007 Key, Asustek is heading upscale. In May the firm launched notebooks with Bang & Olufsen sound systems and introduced a line of laptops with bamboo on the lid, using 20 percent less plastic than other machines. "We nonetheless have a lot of innovation going on," Chairman Jonney Shih says, showing off the private lab adjacent to his office where he retreats to clear his mind by tinkering with Asus gadgets.
One of Asustek's most offbeat innovations is its product-testing strategy. A Buddhist vegetarian, Shih is a supporter from the Tzu Chi Foundation, one of Taiwan's biggest Buddhist charities. He enlisted Venerable Dharma Master Cheng Yen, the foundation's 73-year-old founder, to help test e-readers. Cheng Yen "is the best quality assurance," Shih says. "She is so patient." As Asustek tries to match the iPad, he'll need patience from customers, too.
The bottom line: Asustek is working on new tablets as income of its mainstay machines, small netbooks, begin to flatten.

Einhorn is Asia regional editor in Bloomberg Businessweek's Hong Kong bureau.
Culpan is a reporter for Bloomberg News
.