I thought the idea behind the netbook was for it to be a smaller, cheaper option to a laptop computer. Well, Nokia (NYSE: NOK) has decided that it doesn't want to leave out those who prefer to pay a lot for their tech products, announcing that its new Booklet 3G netbook will carry a price tag of $820!

Therein lies the problem that NOK is going to face when selling the new Booklet. The allure of netbooks is that they can provide the power of a computer, without all the bells and whistles. You basically buy a netbook so you can have the internet, and that is about all. No hard drives are included because of the ability of web-based applications, so you have a drive-free way of connecting to the internet.

Nokia (NYSE: NOK - option chain) shares are rising today after the company unveiled its new Nokia Booklet 3G mini-laptop. The device uses Microsoft's (NASDAQ: MSFT) Windows software, Intel's (NASDAQ: INTC) Atom processor, and will be a "full-function" personal computer with high-speed mobile Internet access capability. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on NOK.

NOK opened this morning at $12.73. So far today the stock has hit a low of $12.66 and a high of $12.87. As of 12:20, NOK is trading at $12.65 up16 cents (1.3%). The chart for NOK looks neutral and S&P gives NOKa neutral 3 STARS (out of 5) hold ranking.

It's only a stopgap measure, everyone knows. It's a temporary reprieve for XP. Just the same, netbooks are allowing XP, the operating system Microsoft tore from its loyal public last year, to make a comeback.

Last year I tried to get a new computer but was so badly abused by Vista I took it back and reformatted my old computer so I could avoid the demanding operating system.

Although PC sales have slowed drastically in the last three quarters, sales of the netbook PC have done just the opposite since the middle of 2008. These miniature notebooks -- which don't have the same capabilities as normal notebooks -- have shot up in sales and continue to ramp up at an impressive rate.

Apple Inc. (NASDAQ: AAPL) was downgraded Tuesday to Underperform from Outperform at Calyon Securities. The analyst cut the EPS estimates and set a $90 price target on the stock. Why? Mostly due to concerns over Mac sales because of the recession and the fact that Apple has a premium pricing model on its Macs. Interestingly, the analyst also cut iPhone unit estimates slightly. Steve Jobs' health was also mentioned as a concern.

That wasn't all, another analyst at Kaufman Bros. trimmed his revenue estimates for the current quarter, but kept EPS estimates the same and the Buy rating.

Apple, Inc. (NASDAQ: AAPL) has declined to compete in the netbook PC space, with CEO Steve Jobs still on the sidelines on when (or if) Apple will ever make such a device. Although netbooks were the only shining light in the last half of 2008 PC sales, the margins are not nearly as nice as other products. But hey, any growth is good growth, right?t?

The article you are reading here was written on a netbook, a $350 machine. A lot of people thought netbooks would not have a market. They have small screens and less powerful processors than a laptop. Most of what a netbook can do can also be done on a smartphone like a BlackBerry.

But, this article is being written on a netbook. I have owned huge laptops for several years and a smaller one for the last year. When that died, I figured "why not take the risk? If it does not work out, how much money has been risked?

According to The Wall Street Journal, "A new breed of low-priced laptops called netbooks have been thriving during the downturn -- so well, in fact, that many high-tech companies are scrambling to adapt."

A netbook can run Linux or a scaled down version of Windows. Chip companies trying to sell high-end hardware like graphics semiconductors are out of luck. Whoever makes big laptop screens may not be around for long.

What's wrong with a netbook. The keypad is small. That takes a few days to get used to. The machine is a bit slow. For a heavy PC user that may cut productivity by five or ten minutes a day. But, it can operate with six or seven windows open and plays video just fine.

And, it weighs two pounds and can be carried around like a copy of a modest-sized biography.

Laptop computers, especially small and light ones, were supposed to be the way the computer companies kept mobile users as customers. It has worked pretty well. At most large PC companies like Apple (NASDAQ: AAPL) and Dell (NASDAQ: DELL), laptops outsell desktops.

The profits from the laptop business could be under siege. Little netbooks from manufacturer in Asia, lead by Acer, are making $500 ultra-small machines that are good for e-mail and internet browsing. Beyond that, they don't do much, but many consumers don't need anything beyond those functions. The products may be a good way for Acer to get market share from larger U.S. PC companies.

In a recession, these "netbooks," are fairly attractive compared to $1,200 laptops that have a lot of features many people don't want to pay for.

According to Reuters, "Up to a third of netbook sales reflect customers ditching their old desktops and laptops, analysts say."

Dell's share price is down to $12.50 from a 52-week high of $30.77. The company and its peers do not need more competition in a world where the economy is hurting and price competition is fierce.

It does not want new competition, but it got it anyway.

Douglas A. McIntyre is an editor at 247wallst.com.

Intel (NASDAQ: INTC) has been building new chips for "netbooks," a product that is much smaller than most laptops and significantly less powerful. Dell (NASDAQ: DELL) has decided to drink that water and bring out a netbook of its own.

According to The Wall Street Journal, "One person familiar with the matter said the new device will likely sell for less than $400."

The launch is a waste of time and money. The smallest laptops now weigh under two pounds and have modest processors. That means the price points for them will keep dropping.

Over in the smartphone industry, companies like Apple (NASDAQ: AAPL) and Research in Motion (NASDAQ: RIMM) are putting out more "computer-like" products each year. Larger handset companies are working to get into the same business because the higher price points of these handsets yield a better margin.

Dell should stick to what it does well. The "netbook" has too much competition and no future.

Douglas A. McIntyre is an editor at 247wallst.com.