Smartphones, netbooks lining up as replacement devices

More capable mobile devices look to be gaining favor with surprising market segments and for an unexpected use: as a replacement for multiple digital devices and communications services.

Several developments this week seem to support this trend, which could impact a variety of market segments. ComScore reported that more lower income users are turning to the iPhone, in particular, as a converged communications and entertainment device, replacing multiple devices and services.

Meanwhile, so-called “netbooks” – small, inexpensive laptops – are emerging as a key new device area, and with some interesting twists. HP, which this week launched its first netbook products, is said to be considering deep discounts on the devices – perhaps even making them free – for users who sign up for a two-year wireless data contract, according to the Wall Street Journal. Meanwhile, Asus, whose Eee machine helped kick off the netbook trend, expects to sell a machine in 2009 priced below $200, company president Jerry Shen said in an earnings conference call this week.

That sub-$200 upfront price tag seems to be the magic spot in the market. The iPhone dipped below it in its most release and T-Mobile’s Android-based G1 phone – which also targets that multiservice user – made sure it launched at $179, dipping all the way to $148.88 in a distribution deal announced this week with Wal-Mart.

“There’s no question that the phone is a voracious convergence device,” said Avi Greengart, analyst with Current Analysis. “It has consumed entire categories and is targeting several others, including music, imaging, GPS navigation and computing.”

What might such highly capable devices replace? Business users already report leaving their laptops behind when traveling, relying on the communications and basic application capabilities of smartphones to get them by on the road. On the consumer side, the potential is even broader, as users – especially young consumers – use such devices not only to place phone calls and text but to keep up with their Facebook pages, listen to stored music and watch movies, access streaming content, and more.

Still, up to now, conventional wisdom had highly functional – and often high-priced – smartphones appealing mainly to upscale buyers. Beyond cost, the complexity of such devices was thought to be unappealing to more mainstream buyers.