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I think the basic netbook concept has and will continue to flourish. Although I've used a relatively 'tiny underpowered' Thinkpad X40 as my second computer for years now, it does sing the netbook song. The important aspects of the netbook are the lack of an internal optical drive and the inherent attention drawn to a web browser and a very basic software suite, both things that anyone who traveled with any of the old compacts would tell you.
The fact is that plenty of people realize they don't want the beef. They just want to check their email and stalk people on facebook, which a small computer is just fine for.
Again, the netbook is not just about screen size, it is about simplicity and portability - I guarantee the 7-10inchers will continue to sell, especially as their screen resolutions continue to increase.