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Netbook Pioneer Asustek Enters the iPad Age Asustek is introducing tablets in response on the Apple blockbuster but even now sees a foreseeable future for netbooks. So far, investors are not convinced
By
Bruce Einhorn and
Tim Culpan

(Corrects the spelling of Asustek from the headline)
Very small computer systems have been good to Asustek. The Taiwanese firm in 2007 released the first netbook, those low-priced mini-laptops that have been the Personal computer industry's fastest-growing products for your past two a long time. Netbooks now represent almost forty percent with the Asus brand's sales and also have been the key factor in helping Asustek tie Lenovo because the world's No. five transportable Personal computer firm, according to researcher International Info Corp.
Now it seems to be much like the netbook growth engine is shedding steam. Netbooks' reveal of the world-wide Laptop marketplace will probably be flat this yr at 12 percent, IDC estimates. As an alternative, buyers are flocking to tablets including Apple's (AAPL) iPad, which offer a lot of the benefits of netbooks. For Asustek, which means making a big push into tablets whilst trying to persuade companies and consumers that you can find even now strengths to netbooks.
On Might 31,Microsoft Office 2010 Professional Plus, Asustek unveiled its first weapons inside 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 expansion in the coming a long time,Office Home And Student 2010 Key," 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,Windows 7 X86, and almost every other Personal computer maker has a tablet inside the works,Microsoft Office Pro 2007, though some have delayed launches within the wake from the iPad. Even though the new Asus machines will hit stores before most with the competition, traders clearly have doubts about Asustek's strategy. Its Taipei-listed shares dropped 18 percent this yr through May 17, when stock product sales were suspended pending the upcoming spinoff of the company's manufacturing arm. One investor worry is that Asustek can't offer as numerous apps as Apple can. "They have a very excellent product but the environment is not ready; there's still not enough content," says Robert Cheng, 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 marketplace for netbooks. The organization 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 even now provide a better user experience" than tablets, says Shen.
To hedge in opposition to a large decline in netbook popularity, Asustek is heading upscale. In May well the organization 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 nonetheless have a lot of innovation going on,Microsoft Office 2010 Key," 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, very small netbooks, begin to flatten.

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