I was shopping for a cheap netbook for the kids, each of which had been saving up to buy one as they are sick of me yelling at them for playing Minecraft on my work system, and the consensus from the store staff was to do everything to steer folk away from the cheap systems.

This is understandable as most electronic store staff are on commissions, and these are lean on cheap computers. It’s much better to sell a thousand dollar unit – with upgraded warranties and accessories – than a low margin, one off unit.

For manufacturers, similar problems exists; these cheap unit cannibilised their higher priced products with better margins. Dell recently announced they are getting out the netbook market and others are following.

Netbooks themselves are in trouble as the market they addressed for cheap, portable, Internet connected devices is now largely covered by smart phones and tablets which offer better battery life and usability.

Interestingly, the battery life argument was even used by the computer store salesfolk who pointed out – correctly – that the newer laptops have better power management than their cheaper netbook cousins.

While the netbook as a category is dead; the concept itself isn’t. As the uptake of tablet computers like the iPad show, Internet connected portable devices are becoming the computer of choice for many people and the advantages of a laptop form factor; a proper tactile keyboard, USB ports and other external connectors are still attractive.

Probably the worse thing for the manufacturers and retailers is the price points are now established in customers’ minds – $400 is what people want to pay for laptops, which doesn’t bode well for those higher priced systems.

Those manufacturers can’t even get into the tablet computer market as Apple now own that sector that the PC vendors and Microsoft squandered a decade’s lead with substandard equipment and badly designed software.

Despite the best efforts of the electronic store’s salesfolk, my kids ended up buying cheap, low specced netbooks out of their savings and those systems run Minecraft quite nicely. Which is another problem for shops and manufacturers stuck with a 1990s business model.

Speculation is mounting about Apple releasing a cheap netbook. The idea is Apple needs to compete in the ultra cheap sector and their existing range is too expensive in the current market.

While there’s no doubt Apple will have to respond to the difficulties in the market and give up some margins and profits, there’s danger in simply chasing other people’s price points.

Apple’s success is built upon high margin products, not the stack ‘em high, sell ‘em cheap models other manufacturers follow with varying degrees of success. Those high margins allow Apple to offer value added services like free help in their Apple Stores.

While it’s important to meet consumer price points in the current market, pitching a product to meet someone else’s price point is madness. Apple’s market couldn’t be different to that of the Asus EeePC for example.

That people are suggesting companies in Apple’s market and financial positions should be doing these things illustrates just how tough times are in the tech industries. This was flagged in yesterday’s SmartCompany New Years Resolutions article where Amanda Gome specifically clearly flagged IT as an area to cut.

As we learnt in the tech wreck, IT spending is the first to be slashed, and from what I’m hearing there’s a bloodbath looming in the technical services industry.

Others are hearing this too. The website GigaOm and Gartner Research both published tips on surviving the downturn last week.

Gartner’s paper was firmly aimed at tech service businesses, but there‘s plenty of good ideas there for other businesses as well. Their key point is you have to lead the market as followers will struggle.

The GigOm article starts from the same premise as Gartner – businesses need to differentiate themselves from the rest of the market – for GigaOm focus and simplicity are the keywords.

Focus and simplicity are how Apple has achieved its position in its market. Right now is the worst possible time to lose this focus.

All of us need to focus on the areas where we have advantages and how we can simplify things for our customers. We need to be talking to our clients now and understanding where their pain points are and how we can help.

Once we’ve done that, we can start getting new ideas and products out there that will help our businesses through the tough period ahead.

Image by Kriss Szkurlatowski.

Let’s see if Vodafone and Dell can do a better job of marketing these packages.

For consumers, it would pay to shop around on these deals as Vodafone currently offer the 5Gb data plan with a free modem for $39 per month.

Over a 24-month period (which is what we’ll have to assume the plan is without any further information) then the package costs $1,680. If we subtract the data component of $936 (24*39) that “free” netbook will cost $744.

Not bad, based upon Dell’s list price of $699 that’s a 3.2% APR, but you can be sure Dell and other netbook vendors will have better deals on their computers next month.

It always pays to do the sums closely before committing to these contracts.