HPQ), Gateway, IBM ( IBM) all slid into a joyless race to see who could make the most computers at the lowest costs. Let's just say in a race to the bottom in manufacturing expenses, the U.S. is a bit outmatched. And that was true well even before the success of Asus and Acer and the ultra-cheap netbook market. The haunting tale of the fallen PC sector comes to mind again this week after Nokia chief Olli-Pekka Kallasvuo told an interviewer on Finnish TV on Thursday that duties of computers and mobile phones are converging. When asked if Nokia was considering adding laptops to its phone business, Kallasvuo said: "We are looking very actively also at this opportunity." For investors, there is hope that Nokia will be as ridiculously late to the netbook fad as it was with other trends, like folding phones, ultra-thin designs and touchscreens. A Nokia laptop could easily be a more damaging flop than Palm's ( PALM) short-lived Foleo notebook. If you want a sense of what direction the convergence trends are headed, look at Apple ( AAPL). The computer maker took a bold sharp turn a few years ago. Resistant to the populist movement toward cheaper laptops, Apple instead made an expensive computer phone. Today, the iPhone is not only the design leader in smartphones, it is Apple's fastest growing product segment at a time when consumer electronics demand has flat-lined.
Netbooks -- cheap laptops powered by the spread of mobile broadband and priced to match today's stripped-down spending climate -- are the gadget of the moment. But even netbook makers see where this is all headed. Asus, the leading netbook shop, has plans with Garmin ( GRMN) to jump into smartphones. Netbooks are eroding sales of laptops and crossing up chip suppliers like Intel. In 2008, netbooks represented 10% of the total PC market up from a nearly negligible level in 2007, according to IDC. The trend left Intel ( INTC) sitting on a pile of unsold PC processors with high hopes that its Atom chip will be the ticket to get into the netbook party. Later today, Dell will provide an update on the impact of netbooks and shed light on its latest efforts to reinvent a new business model. The company will deliver its earnings report after the market closes. Dell shares are down 60% over the past year. To be clear, if Nokia takes a plunge into the roiling netbook waters, investors will get soaked.