Castellano said Atom will hold 80 percent market share of the 21.5 million netbooks expected to be sold in 2009, but that technology changes—including trends in cloud computing and Linux—will undermine Atom's grip on the market during a recessionary time when people don't want, and can't afford, a second laptop just to carry around.

The movement is toward the original intention of a netbook—an inexpensive device for accessing the Internet, Castellano said.

"We see two technology factors converging with the poor macroeconomic situation that will create a market for ARM—the release of the Cortex-9 microarchitecture and the emergence of cloud computing," Castellano said in prepared statement.

Companies including Qualcomm Inc., Freescale Semiconductor Inc. and Texas Instruments Inc. are trying to gain market share in netbooks with ARM-based processors. Because the Windows XP operating system requires an x86 processor like Atom, some believe that ARM-based processors will face an uphill battle in netbooks. An analyst at International Data Corp. last week predicted that ARM-based processors would command no more than 10-20 percent of the market for the next few years.

Castellano disagrees. "Anyone thinking that ARM will make up only a small percentage of netbooks gong forward is not thinking outside the box," he said.

Castellano noted that Linux is free and said that the rise of cloud computing would enable netbook manufacturers to eliminate the hard drive or solid state drive, reducing the price of the product another $55 or so. Microsoft charges a licensing fee of up to $35 on each netbook, Castellano said.

Amid growing competition, Castellano predicted that a new infrastructure would evolve among software providers modeled after cellphone providers and Hewlett-Packard Co.'s successful strategy to sell more ink cartridges by reducing the cost of printers. This subsidized bundle model will grow the ARM netbook's market share, he said.

"As cloud computing becomes more sophisticated, we will see an Internet protocol-based convergence of audio, video, productivity applications and IT data run on ARM-based netbooks," he said.

Netbooks were invented as a means for people to connect to the Internet and communicate, Castellano said, with origins in the One Laptop per Child. Program to create an inexpensive computer for children in developing countries. The hope was that it would have Wi-Fi, a color screen, a full keyboard and sell for about $100, he said.

Taiwan's Asustek, the world's seventh largest computer manufacturer, launched the first commercial netbook in late 2007 and sold 350,000 units in a few months using Atom, according to Castellano. The result was a low-end subnotebook costing between $300 and $400 but selling to middle-class consumers rather than to the poor, he said.

The Information Network (New Tripoli, Pa.) is a high-tech market research and consulting firm.