Genuine Windows 7 Netbook Pioneer Asustek Enters t

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Netbook Pioneer Asustek Enters the iPad Age Asustek is introducing tablets in response towards the Apple blockbuster but still sees a future for netbooks. So far, investors aren't convinced
By
Bruce Einhorn and
Tim Culpan

(Corrects the spelling of Asustek from the headline)
Very small computer systems happen to be good to Asustek. The Taiwanese organization in 2007 released the primary netbook, individuals low-priced mini-laptops which have been the Personal computer industry's fastest-growing product for your previous two many years. Netbooks now represent virtually forty percent in the Asus brand's income and also have been the major issue in helping Asustek tie Lenovo since the world's No. 5 portable Personal computer business, in accordance to researcher Worldwide Info Corp.
Now it looks much like the netbook growth engine is losing steam. Netbooks' share in the worldwide Pc marketplace will probably be flat this 12 months at 12 percent, IDC estimates. Instead, buyers are flocking to tablets including Apple's (AAPL) iPad, which provide a lot of the benefits of netbooks. For Asustek,Windows 7 License, that means creating an enormous push into tablets whilst attempting to persuade corporations and shoppers that you will find nonetheless strengths to netbooks.
On Might 31, Asustek unveiled its initial weapons in the battle in opposition to the iPad: the Eee Pad as well as the Eee Tablet. Like Apple's unit, the Eee Pad—available next winter—will have a touchscreen,Office 2007 Activation Key, 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 industry in early 2011,Windows 7 Enterprise, 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 revenue and earnings progress within the coming years," 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 introduced a mini-tablet called the Streak, and almost every other Personal computer maker has a tablet within the works,Windows 7 Ultimate, though some have delayed launches within the wake of the iPad. Although the new Asus machines will hit stores before most from the competition, investors clearly have doubts about Asustek's strategy. Its Taipei-listed shares dropped 18 percent this 12 months through May 17, when stock income were suspended pending the upcoming spinoff of the company's manufacturing arm. One investor worry is that Asustek can't provide as numerous apps as Apple can. "They have a very very good item but the environment is not ready; there's nonetheless not enough content," says Robert Cheng,Genuine Windows 7, 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 firm 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 against a large decline in netbook popularity, Asustek is heading upscale. In Might the firm launched notebooks with Bang & Olufsen sound systems and launched a line of laptops with bamboo on the lid, using 20 % less plastic than other machines. "We even now 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 product sales 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
.