Why UltraBooks Have Been Slow to Take Off

by Tim Bajarin   |   August 3rd, 2012

One of Intel’s big programs for this year has been the development and marketing of a new line of slimline notebooks called Ultrabooks. This product is really following in Apple’s MacBook Air footprints, a product that has been very successful for Apple.

In reality, as technology has gotten smaller and more powerful, it was inevitable that laptops would follow Apple’s MacBook Air example and become thinner, lighter and still have serious computing power. To that end, Intel and almost all of their OEM partners have jumped on the Ultrabook bandwagon.

In the spring, Intel and their partners launched a major marketing push for Ultrabooks and have spent a huge amount of money trying to get the attention of business and consumer users to try and move over to the Ultrabook platform of notebooks. Also, most OEM’s have created some great versions of Ultrabooks that at the very least has caught the eye of these folks who really do like the idea of a lighter laptop.

However, the cheapest Ultrabook starts at $699 and is a relatively low powered system. But most of the Ultrabooks have been priced in the $799-$899 range, a price that although reasonable, we believe may not be an attractive price range for consumers. And although business users are OK with these upper endprices for laptops, they continue to want laptops that have a lot of power and features that can’t be crammed into these thinner laptops. This has been at the heart of the slow uptake in Ultrabook purchases so far.

But there seems to be another reason for the slow uptake in Ultrabooks with consumers and even many business users. We have been privy to some very interesting research that shows that the market for laptops appears to be bifurcating into one that is focused on low cost notebooks and the other on the higher end of the notebook market. The research suggests that the mid market for laptops is declining and that laptops priced at $699-$899 may be going away as users either opt for low cost laptops or if they want more powerful laptops, buy up to laptops in the $999-$1299 range instead.

Part of this lack of overwhelming interest in the $699-$799 price range is also due to the iPad. The interest in the iPad remains high, and right now from our research we are learning much higher than notebooks by the mass market. Because of that UltraBooks priced around the range of the iPad seem to of less interest. It appears for the mass market next generation notebooks need to be lower cost than the iPad or much higher and include valuable innovations in the upper end to make it attractive.

One could also argue that Windows 8 could play a role but many consumers in the market we speak to are not that interested in Windows 8 yet.

If true, this is bad news for the current crop of Ultrabooks. Due to component costs and other related marketing costs, almost all of the Ultrabooks are priced between $699-$899 with a few even at $999-$1200. To be fair, many upper end models that are really high-powered laptops are being called Ultrabooks, but at this price they are considered upper end laptops.

This research reflects similar information we are getting from consumers. Over the last 3 weeks I have spoken to dozens of consumers about their back to school or fall laptop purchases and all planned to spend no more than $599 for a laptop. All where aware of Ultrabooks and while they would have liked to have one, they did not have the budget for anything more then $599. And if they were buying it for their kids as part of the back to school requirements, the prices they planned to spend was closer to $399 to $499 for laptops this year.

If it is true that the mid market for laptops in the $699-$899 range is going to evaporate, it will put a lot of pressure on the OEMs next year to try and get prices down on Ultrabooks if they want any traction with consumers in 2013. The good news for them is that business users seem to want to buy up and laptops in the $999-$1299 range have good margins which means they can actually make some money on these laptops.

Ultimately, Ultrabooks will be successful since the technology is here to make them lighter, thinner and still have good computing power. But for them to sell in the volumes OEM’s need to make money on low end laptops they have to have more consumer friendly pricing to really take off.

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.
  • steve_webb

    The MacBook Air is the least expensive MacBook. That is one of the reasons that it sells. When other MacBooks sold for less than the MacBook Air, the MacBook Air did not sell as well as it does now.

    UltraBooks are NOT the least expensive Windows NoteBooks. That is one of the reasons that they are not selling. UltraBooks do not compete against the MacBook Air along the price vector. They have to compete against other Windows Notebooks first.

    Another reason is that savvy consumers think that HP (and possibly others) will lower the price of UltraBooks if they don’t sell. HP set the trend (a trend with one data point?) with its tablet.

    The final reason is Microsoft. Microsoft spent millions educating Windows buyers that price is everything when buying a Windows Notebook, in its Notebook buyers series of advertisements. As a result, and despite what the pundits now say, people are expecting the Windows Surface Pro to be priced aggressively. In this case, the trend was set by the xBox.

  • http://about.me/samirsshah Samir Shah

    The market for PCs (i.e. Ultrabooks) is in India and China where post-PC world has not arrived in full force, but here in India Ultrabooks are prohibitively expensive. Making Ultrabooks cheaper in western world is not going to get Intel anywhere. Bring Ultrabooks below Rs. 35,000 in India and see them take-off.

  • http://openid.aol.com/steffenjobbs I. M. Wright

    Why would most consumers be itching to get their hands on Windows 8 when they’ve got Windows 7 which is proven and more than adequate for most users? Windows 7 is rock stable. Consumers aren’t going to get the extra hardware features that Windows 8 can support if they don’t want to pay more than $599 for a Windows notebook. That’s already dirt cheap. They’re not going to get any touch screens that Windows 8 supports for that price. If consumers aren’t even interested in the UI that’s no longer called Metro, then what’s the point of even upgrading from Windows 7. I think that Microsoft is answering a question that no one asked when they decided to go with Windows 8. Windows 8 upgrade is a very reasonable price, but it’s probably not necessary for most users. I make no predictions about Windows 8 sales. Only time will tell. In this economy, I don’t think it will be a financial success if a lot of people aren’t even buying Wintel computers.

    • http://twitter.com/qka qka

      I suspect most consumers are interested in Windows 8 because it is “new”. They don’t know what is different or if it is really better for their circumstances, they just know that it’s “new”. I’ve seen this multiple times before for “new” features in the Wintel space. Microsoft’s & Intel’s marketing and advertising can be persuasive, even if there isn’t anything there.

  • http://twitter.com/qka qka

    It appears for the mass market next generation notebooks need to be lower cost than the iPad or much higher and include valuable innovations in the upper end to make it attractive.

    Is that less than the $500 iPad 3 or the $400 iPad 2? Further, do you believe that their is an effect from even lower priced tablets from other makers? Or are they too minor players in the market?

    As there is the beginning of a trend towards lower price tablets, I’m interested in seeing what that does to sales of lower priced notebooks of all descriptions.

  • http://twitter.com/jamesesaldana studentrights

    “Ultrabooks are priced between $699-$899 with a few even at $999-$1200″

    Which one of those under $899 come with a SSD drive?

    It’s not an Ultra-book without an SSD… that’s what makes the experience so different (instant). All of the Apple Airs and Retinas come with an SSD.

  • melgross

    If we’re talking about going back to school, we also have to talk about the college crowd. There, the favored laptop is a MacBook Air or a MacBook Pro. It seems as though, from all the surveys done over the past few years that college students are buying those at about a 50%, or chgher clip. We’ve all seen the many photo’s from classrooms where almost every student had one Mackbook or another. A number of colleges and universities have been requiring Macs over PC’s for some time., or at least suggesting that a Mac is the preferred system.

  • theNewDanger

    At this point, discrete graphics is an absolute prerequisite for laptops, ultrabook or not, to get my money. There is no wisdom in anyone buying a computer with integrated graphics on the CPU that gets surpassed by 2012 iPad in graphical prowess.

    • steve_wildstrom

      Intel’s integrated graphics (HD Graphics 4000, as used on the MacBook Air) have improved to the point where I think the overwhelming majority of users will be satisfied with them, especially on Ultrabook-class systems. These are generally not used a lot for really graphics-intensive or computation-intensive purposes.

    • http://feedsanywhere.com/ Todd Martin

      The iPad’s graphics are not as powerful as you seem to think. Most laptop integrated graphics sold today are faster. Of course discrete graphics is faster still.

      • steve_wildstrom

        One measure of graphics power is the number of processor cores, or execution units as Intel calls them. The current iPad has four. The Intel HD4000 has 16.

  • Monopoly Lover

    C’mon INTEL!!! IF YOU CAN BRIBE (AND SPANK) DELL AND OTHER MANUFACTURERS TO THE TUNE OF 1-BILLION Dollars per year to monopolize, then maybe you should just save your bribe money and give computers to us poor folks for free!

    We’re poor, because your monopoly-priced processors cost us an arm and a leg!!

  • Calipenguin

    The tablet market is completely different from the notebook market. The apps are different, the convenience factor is huge, as is the productivity factor. Consumers who already own a mid-range laptop will spend more money for a tablet, but they won’t necessarily buy another mid-range laptop. Consumers who already own one iPad, especially the iPad 2, won’t need to buy another tablet. Consumers who don’t own either a laptop or tablet will probably buy a cheap laptop first. Therefore consumers who already own a decent laptop but not an iPad would rather buy an iPad first before considering an Ultrabook simply because the iPad opens up a vast pool of apps unavailable to Ultrabooks. Business users can afford the new Ultrabooks but IT departments don’t want Win8. If these users must choose between a new Ultrabook or new iPad, I bet most would want the iPad for mobile apps and sales demos and keep their trusty old Win7 laptops for productivity apps, USB peripherals, and built-in DVD burners.