New Dell Netbook and Related Info

Dell Inc. launched its entry into the heating netbook market, the Inspiron Mini 9. Elsewhere, the company reported some financial setbacks and rumors are swirling regarding a sale of its manufacturing facilities.

Focal Points:

• Dell's new Inspiron Mini 9 is the company's first netbook, which it is promoting as an Internet companion. Dell is positioning the device as a light-weight and inexpensive alternative to Internet usage on cellular phones that does not require left/right scrolling to view an entire page's width. All systems come with a three USB ports, a nine inch screen, Ethernet, a media card reader, and standard Wi-Fi. Configurations can include either a Dell-customized version of the Linux Ubuntu distribution or Microsoft Corp. Windows XP Home at prices starting at $349 and $399, respectively. Both Linux and Windows entry level systems feature 512 megabytes (MB) of RAM, though the Linux system only possesses 2 gigabytes (GB) of solid state disk (SSD) storage and additional 2 GB of free remote storage from Box.net compared with the Windows system's 4 GB of built-in memory. An even higher-end Windows configuration is mated to 8 GB of SSD and 1 GB of memory. Options include on-board Bluetooth and a 1.3 megapixel Webcam. The netbook's four cell battery – the only current option available – is said to last approximately three hours on a single charge. The Inspiron Mini 9 is available now in Canada, select European countries, Japan, and the U.S.
• Dell reported strong revenues but somewhat weakened net income for its second quarter. Revenues reached $16.4 billion, up from $14.8 billion in the same quarter the year prior. The 11 percent gain resulted in a net income drop of 17 percent, coming in at $616 million compared with $746 million in the prior year. The company insists it is on track with its five key business concentrations – consumer, enterprise, emerging countries, notebooks, and small-to-medium sized businesses (SMBs). A portion of the weakened performance is due to a $1.4 billion repurchase of Dell stock and $52 million in business realignment and intangible purchases. Headcount has already been reduced by 8,500 of the 8,900 target the company set for itself last year. Dell's strongest showing was in notebooks, where it grew 44 percent in units and 26 percent in revenue. Though announcements have yet to materialize, Dell is expected to enlist the assistance of wireless carriers to sell its new Inspiron Mini 9 notebook, as it has room for an on-board 3G network card.
• Recent years have seen sales change dramatically in the PC market. Sales of notebook PCs are much stronger now than they have been in years past, and the consumer market is accounting for a greater percentage of overall shipments. Thus, all PC vendors have been forced to change both their product lineups and manufacturing techniques. Once the top vendor of PCs worldwide, Dell has slipped to second place and is stuck with an abundance of factories geared towards desktop manufacturing that are insufficiently oriented for notebook configurations. Sources close to the company claim that Dell will look to sell a majority, if not all, of its factories "within the next" 18 months, according to a Wall Street Journal article from this week. The article also mentions that Hewlett-Packard, Co. already builds fewer than half of its PCs at corporate-owned facilities.

Experton Group believes Dell is continuing to retool its business so that it is better able to meet the changing needs and purchasing habits of consumers and businesses worldwide. This revamping will certainly require the company to shed many, if not all, of its manufacturing as they no longer offer the competitive advantage due to large shift towards notebook purchases at retail establishments. Dell's success is due largely to its inventory and operational excellence in desktop manufacturing, and the company should not expect to reap significant windfalls from the sale of facilities tuned towards an old way of business. Entrance into the netbook space should offer the company further ammunition in its quest to gain notebook sales, and Experton Group believes netbooks will find their way into the enterprise market over the next 12 months thanks to low price, and high functionality and portability. The Inspiron Mini 9 is a solid netbook, however, firsthand accounts point to a cramped keyboard and the option for a traditional hard drive would be preferable to many. IT executives should expect Dell to continue to cut costs and streamline processes, but much of this newly-required direction is uncharted territory for the company. IT executives should expect Dell act hungrily to gain and keep its enterprise business, and heightened market pressure should present good opportunities for contract negotiations.