Is It Safe? Intel Dominates Netbook Market

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Intel(INTC Quote) has been taking hits this year between a $1.06 billion fine from the European Union and a stock price that's trailing the industry. But that might change as the chipmaker seizes the netbook market.

The EU's fine, a penalty for engaging in anti-competitive practices, could cut Intel's earnings by 20% during the quarter it's exacted. The EU said Intel used illegal rebates to pay computer makers to use its chips. It's a strange strategy considering it's clobbering the only other chipmaker, Advanced Micro Devices(AMD Quote).

Intel has already established its dominance in netbooks, small computers designed to surf the Web and do little else. Companies are expected to ship 35 million netbooks this year, according to ABI Research. That number is estimated to increase to 139 million by 2013.

Computer makers like Hewlett-Packard (HPQ Quote), Dell(DELL Quote) and ASUSTeK Computer have been expanding their netbook lines, pitching them as a cheaper alternative to conventional computers. These devices rely almost exclusively on Intel's new power sipping Atom processor. As consumers shift from immobile desktops to laptops and netbooks, Intel's position will only improve.

A quick look at the online offerings of America's largest electronics retailer, Best Buy (BBY Quote), illustrates Intel's lead over AMD. Intel supplies the chips of nearly 70% of the desktop computers and 86% of the laptops Best Buy sells. All the netbooks listed on the site use Intel chips.

Over 30% of Intel's revenue comes from the consumer microprocessor unit. Its dominance in this business should help the company weather the slowdown in business spending better than most. If netbooks, which typically cost $200 to $400, take hold with frugal customers, the revenue stream will help protect the company from weak consumer spending.