The explosion of mini-notes (netbooks) this past year has been a bitter-sweet pill for notebook manufacturers to swallow. On the one hand, PC makers will take revenue wherever they can get it, and the volume growth looks good to investors. But the profit margins aren't as attractive on low-cost netbooks as they are on pricier notebooks, and as netbook shipments grow, notebook revenue declines, according to a new report by DisplaySearch.

Netbook revenue surged 37 percent in in the third quarter, and a staggering 264 percent in year-on-year. But while consumers are gobbling up low powered, low price mini-notes, few buyers seem interested in larger notebooks anymore, a segment in which revenue was down in every quarter for the past year.

"Mini-notes have been a significant contributor to volume growth in the portable PC market as their very attractive price points make owning a secondary computer viable for many consumers. However, the lower ASPs of these devices are clearly having a negative impact on portable PC market revenue," said John F. Jacobs, Director of Notebook Market Research.

DisplaySearch said it expects this trend to continue well into next year, with mini-notes predicted to account for 21.5 percent of shipment volume but just 10.9 percent of total revenue for the portable PC market in 2010.