As part of its earnings report, the company noted a 6 percent year-over-year revenue drop in the unit that includes Windows. There were several factors responsible for that, including the impact of a hard drive shortage brought on by flooding in Thailand. But the drop in Netbooks was a major factor, as well.

Consider these two stats:

A year ago, netbooks represented about 8 percent of the PC market, according to Microsoft. Now they account for just 2 percent of the business.

The consumer PC business was down 6 percent last quarter. However, excluding netbooks, the business actually grew 2 percent.

For those looking to see the impact of the iPad on Microsoft’s business, I’d point to those statistics. While they are clearly two totally separate products, they have filled a similar niche: A good second device for those who already have a PC and want an easy way to surf the Web and consume some content, on the couch or on the go.

The one getting all the attention is an offering in the Ultrabook category that’s priced at $900. It’s called the HP Folio¹³, and aside from its price, its headline feature is that it delivers a full nine hours of battery life.

The Ultrabook is a concept primarily being pushed by Intel, so much so that Intel even owns the trademark rights to the name. Inside the Folio¹³ are the latest Intel Core processors. It represents the hopes of a PC industry that has seen anemic sales with little sign of a bounceback, though that depends on whom you ask.

Major challenges have been the continued popularity among consumers of Apple’s iPad, and to a lesser extent other tablets, and the impressive sales of Apple’s MacBook Air, which now accounts for nearly a third of Apple’s notebook sales. It may not be an Ultrabook technically, but conceptually the similarities are substantial: Thin, light, sporting solid-state drives and speedy boot-up times.

And while the MacBook Air is a big winner for Apple, there’s as yet little evidence that there’s much demand for a similar product running Windows. Last month, it emerged that Acer and Asus expect to sell only 100,000 each by the of 2011, which would amount to between one third and one half of what they originally hoped.

Yes, it’s early days for Ultrabooks — machines that support Intel’s full design vision won’t be on the market for another several months. And the industry is just now starting to bang the drum seriously for the Ultrabook. Asus Chairman Jonney Shih talked about the category in an interview with Walt Mossberg at AsiaD last month.

In its press releases, HP expressed the hopes of an entire industry when it quoted IDC analyst Crawford Del Prete saying he expects PC makers — including HP — to sell 95 million Ultrabooks by 2015. At their current levels, there’s nowhere to go but up.

Sources at Acer told DigiTimes that Apple’s iPad undercut the company badly in the netbook market. And it quickly became clear that simply boosting shipments of notebooks to win market share was no longer a viable strategy. “We were almost too successful in the past…but more recently the iPad and other new form factors have had a very big impact on the PC market,” Acer Chairman J.T. Wang told the Financial Times. “We have to change our business strategy.”

And leadership. Because Acer needs to replicate in tablets its success in notebooks. To do that, it must approach the market as Apple or HTC might, searching out profits on high margin devices. And according to Acer execs, Lanci was too busy fighting a pricing war with Dell and Hewlett-Packard to realize it. Said Acer CFO Tu Che-min, “There is good consensus among the board members that the tablet is the way to go.”

Time to chase profits over market share.

The new heads of Intel’s Ultra Mobility Group are Mike Bell and Dave Whalen.

David Perlmutter, executive vice president and Intel Architecture Group general manager, said in a statement that Intel “remains committed” to the Atom business, which Intel calls its Ultra Mobility Group. “We continue to make the investments needed to ensure that the best user experience on smartphones and handhelds runs on Intel architecture, and to ship a phone this year.”

The fact is, however, that for all Intel’s efforts, Atom hasn’t gotten very far. While it’s been a favorite of the netbook set–the small form factor PCs that were so popular before Apple’s iPad showed up on the scene–the Atom chip has largely failed to even mount a challenge against chips based on the ARM architecture in tablets and smartphones. In fact, as we saw at the Consumer Electronics Show in January, the reverse is true. ARM-based chips are now aiming at traditional notebook-type devices running full versions of Windows.

“Each new product category typically causes a significant shift in market shares,” said Canalys senior analyst Daryl Chiam. “Apple is benefiting from pads, just as Acer, Samsung and Asus previously did with netbooks. The PC industry has always evolved this way, starting when Toshiba and Compaq rode high on the original notebook wave.”

And to those who contend that the iPad and similar devices shouldn’t be tallied in the same category as laptops and desktops?
“Any argument that a pad is not a PC is simply out of sync,” said Chiam.

[Image credit: Gizmodo commenter Ahubbuch]

Which would spike iPad sales from 14 million this year to 36 million in 2011.

“We model Apple’s iPad continuing to dominate…in 2011,” Cihra writes in his 2011 forecast. “iPad not only launched with phenomenal early uptake but effectively sent all wannabes back to the drawing board, delaying most competitive tablet launches well into CY11. Yet we now already look forward to the first iPad 2 refresh in March (i.e., establishing annual cadence for iPads in March, iPhone each June and iPods in Sept). An enormous multi-year opportunity, we continue to view iPads less about the ‘product’ but rather igniting an explosion toward ‘thin-client’ Access computing.”

Given that explosion and Cihra’s forecast of a 226 percent spike in tablet sales, how will the the PC fare in 2011? A bit worse than it did the year prior. Cihra figures global PC market unit growth will slow to about 9 percent in 2011 from 14 percent in 2010.

Guess what happened to that missing five percent?

Says Cihra, “We see cannibalization from ‘thin-client’ iPads/tablets, particularly vs. netbooks and in multi-PC homes, already growing to 1/7th the size of the overall PC market in 2011 and shaving 5 percentage points off what PC growth might otherwise have been.”

Unless, of course, you consider the tablet part of the PC market. If you do, then the global PC market in 2011 and beyond looks quite a bit better, as the chart below shows.

In posts on FriendFeed and Twitter, Paul Buchheit said on Tuesday that he thinks Google will axe the product next year, either fusing it with Android or killing it outright.

Chrome OS will meet that fate, Buchheit said on FriendFeed “because ChromeOS has no purpose that isn’t better served by Android (perhaps with a few mods to support a non-touch display).”

Buchheit is certainly not the first person to question Google’s dual-operating-system strategy. (Microsoft CEO Steve Ballmer notably did so at last year’s D8 conference, although the soon-to-be exiting Ray Ozzie followed up that he actually sees Android as a bet for the present state of mobile while Chrome OS is a bet on a cloud-based future.)

“Yeah, I was thinking, ‘Is this too obvious to even state?’, but then I see people taking ChromeOS seriously, and Google is even shipping devices for some reason,” Buchheit wrote on FriendFeed.

Google originally hoped to have Chrome OS-based computers for sale this year, but has run into some delays. Last week, the company released a beta version of the software and distributed to testers an unbranded laptop running the operating system. However, it’s worth noting that in doing so, Google has hardly made the strongest hardware case for the operating system, using a relatively bulky netbook with a reliable, but hardly power-sipping Intel Atom processor.

The idea of merging the two operating systems has some merit. Doing so would pair a top-notch browser with an ecosystem that already has a lot of applications and developers.

For now, the operating systems are distinct, with Android running hundreds of thousands of applications and used largely on phones, along with a few tablets, such as Samsung’s Galaxy Tab. However, Google VP Andy Rubin confirmed after his appearance at last week’s D: Dive Into Mobile that the company is working on a new version of Android, known as Honeycomb, that is geared exclusively to tablets. (The full video of Rubin’s onstage appearance was posted on our site earlier today.)

Acer and a couple of other hardware makers have said they plan to do Chrome OS netbooks next year once the software is ready.

This year I’m not attending because I had other things to do, but I managed to catch up with Anderson by phone this morning to get a quick rundown of his predictions. Here they are, as summarized by me with a few quotes from my chat with Mark:

1. The smartphone market breaks in two. Secure for the enterprise vs. consumer-oriented. As companies become increasingly concerned about protecting their intellectual property from being exposed or stolen in network-based attacks, corporations will become a lot more careful about allowing employees to use smartphones on their networks. “Research In Motion will get a ‘yes’ nod right away, Apple’s iPhone will get a tentative ‘yes’ and Microsoft will be next in line after that if they’re willing to see the opportunity that’s in front of them, with a special secure version of Windows Mobile 7. Everything else, Android in particular, will be in the other seat.”

2. Wireless carriers make a grab for power. Increasingly marginalized as the owners of so-called dumb pipes, carriers will use Google’s Android to make a grab for power they’ve been generally losing lately on the handset. “Android gives carriers power while Apple’s iOS takes it away. The long-term trend toward the carriers ultimately losing their power will not change, but in 2011 they’ll see Android as a ticket to regaining some of the power they’ve lost on the handset.”

3. ITunes seeds its own competition. As much as it appears to be the monolithic player in digital media, iTunes will seem less so this year. “I think Netflix is going to be an amazing story in 2011. It may have out Hulu-ed Hulu in terms of video.” However, iTunes’ control of the music market will remain unchanged.

4. The free-app ecosphere hits a money wall. All those inexpensive and free applications on the iPhone and Android phones will start to cost a lot more than they did before. “If it’s an app that helps you rent a car from Hertz or fly Southwest Air it will still be free. Real smartphone applications will start to cost money and the prices will escalate. They’ll go from costing zero to $3 to between $10 and $30.”

5. Google loses its way. Google will fail to answer the fundamental question, “What business am I in?” and will be perceived as confused and lacking a cohesive strategy. “Google is all over the place with its driverless cars and Google phones. There’s lots of great ideas bubbling up through the employee ranks getting nods from top management, but I don’t see any strategy there. It’s a fun place to work, sort of like a Xerox PARC for grown-ups. And there’s nothing wrong with that unless you’re a shareholder. There’s never been a company with so much money and so random a strategy as Google.”

6. The year of the electric car, part 2. Electric cars start showing up in real production numbers, and charging stations for cars start popping up like weeds. “The numbers begin to shoot up in 2011 and they never stop.”

7. Carry-alongs–netbooks, tablets and the like–remain the fastest-growing segment of computers. Expect to see a lot more 9-inch and 7-inch devices this year.

8. Data Matters. Oracle takes off and becomes a global platform for databases. “Larry Ellison and Mark Hurd working together remind me of Bill Gates and John Shirley. One is the brilliant visionary and strategist, and the other is the genius operations guy. SAP will suffer as a result, and in fact already is. It will get worse.”

9. Net TV is in, cable is out. Internet-based TV options will penetrate about 40 percent of U.S. households, which will trigger a revolution in mass media. Cable and satellite providers will suffer. Cable-cutting is real and will be seen not as the result of consumers cutting back in lean economic distress, but as making a permanent choice. “They won’t be back.” Netflix (see prediction No. 3) will make a breakout play to reach them.

10. E-Books go mainstream Though their share of the book-publishing market will remain fractional, the growth of that fraction that is e-book sales will go ballistic. Expect revenues in the ballpark of $160 million per quarter and a compound annual growth rate of about 140 percent. “E-reading will become as common as eating with a spoon.”

So how accurate is Anderson? Very, he argues, though what forecaster wouldn’t? You can judge for yourself. Here’s a story I did last year for Bloomberg Businessweek on his predictions for 2010, and another on his predictions for 2009.

The new unit, whose existence was first reported by the New York Times, comes as a wave of Android-based tablets hits the market and as Google announces the first beta test of Chrome OS-based netbooks.

The group will be headed up by Doug Davis (pictured here), an Intel vice president previously responsible for the embedded chip unit that helped get the Atom processor into cars and other nontraditional devices. Before forming the new unit, Intel had included its tablet and netbook effort within the same unit that handled all other PC chips.

“It’s just a matter of laying extra focus on that area,” said Intel spokesman Bill Kircos.

Intel has found its way into the vast majority of netbooks, led by the success of its Atom chips. Tablets, meanwhile, have been a different story. Apple’s iPad–the dominant force in the market–uses Apple’s ARM-based A4 processor, while Android tablets also use various non-Intel chips. Intel has been in Windows-based tablets since the first tablet PCs came out early last decade, but Windows 7-based touchscreen slates are just now coming to market. Microsoft has promised that more models will be coming, particularly next year once Intel’s Oak Trail processor is available.

“The weight of the PC industry is now targeting tablets,” spokesman Bill Kircos said, adding that the company expects 35 Intel-based tablets to come out in the first half of next year, along with about 65 netbooks using its processors.

Although Chrome OS is designed to run on a variety of processors, it is worth noting that the first model–an unbranded netbook for early testers–does use an Atom processor.

Although netbooks have faded from the spotlight with the rise of the iPad, Kircos said that Intel hopes to spark interest in the category by bringing over some features previously found only in full-fledged notebooks, such as Wireless Display (Wi-Di), which lets computers beam content wirelessly to a television with a special adaptor.

“We’ll be starting to innovate a lot more on the netbook,” he said.

Today, well, not so much.

For those who have already forgotten what the smartbook even was, the idea was to have a low-cost device that looked a lot like a netbook, but offered far better battery life and instant-on capabilities.

But once Apple released the iPad, everyone started focusing on tablet devices rather than on little notebooks.

“Obviously, tablets are the flavor of the day,” Jacobs said in an interview on Tuesday, ahead of his panel discussion at the Churchill Club.

The good news for Qualcomm, Jacobs said, is that the tablet requirements are basically the same as those for a smartbook.

“We probably did ourselves a little bit of a disservice by using [the term] smartbooks because people then thought notebooks and therefore it was a clamshell form factor,” he said. “We always thought about them not in terms of form factor but in terms of what they did, meaning always on, instant on, always connected, always downloading–the tablet designs that are out are doing that.”

Jacobs said we will probably see some devices with a physical keyboard, but said that next year we’ll continue to see far more slates than clamshells. The same, he notes, is also holding true for the phone.

“Keyboards on smartphones have become less and less evident for most of them,” he said.

For its part, Qualcomm is working on making its processors faster and more power efficient. A dual-core chip, due in the first half of the year, will offer five times as much performance or provide the same oomph as the current chips while using only a quarter as much power.

Since Jacobs has a good view of all the various devices coming to the market, I asked him whether he thinks that a couple of years from now we will still see five or six competing smartphone operating systems.

“A couple years from now I think we will,” he said. “Five to 10 years from now, I think there will probably be some winners and some losers although it’s pretty hard to say who those are going to be because different companies bring different things to the table.”

The carriers will bring some pressure, he said, given they have to provide support and shelf space to all the different operating systems. However, he also said it’s likely that some alternate channels will emerge beyond just sales from the carriers.

“It’s hard to put a time frame on when more consolidation will happen,” he said. “I think right now we are in a period of expansion. You are going to see more stuff….Everybody is chasing [Google] Android and Apple right now, but I think there’s room for a lot of diversity, at least in the near term.”

Intel on Monday detailed plans to begin offering a version of its Atom microprocessor–best known as the calculating engine inside millions of low-end portables called netbooks–that the company is packaging along with a different sort of a chip supplied by Altera. The combination is designed for what industry executives call “embedded” applications, a loose term that refers to office equipment, cars, medical devices, industrial machines and just about anything that is not a computer.

Companies designing such products are a key focus for Intel as it tries to diversify beyond PCs. They often need special circuitry to handle chores that aren’t easily carried out by general-purpose microprocessors, like Atom.

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