Dell: Consumers Having Second Thoughts on Mini-Notes?

John Jacobs – Director, Notebook Market Research, DisplaySearch

Michael Dell, CEO of Dell, recently said during a speech at the Churchill Club in Silicon Valley that soon after purchase, mini-note buyers say, “‘The screen’s gonna have to go. Give me my 15″ screen back.’” He also said, “We see a fair amount of customers not really being that satisfied with the smaller screen and the lower performance-unless it’s like a secondary machine or it’s a very first machine and the expectations are low.”

Is this to be taken as an indication that Dell does not plan to put much of an emphasis on this fast growing market segment? Dell was a little late to the mini-note market, entering a couple of quarters after Acer and Asus, and their current market share of mini-notes is ~8% (according to the DisplaySearch Q3′09 Advanced Quarterly Notebook PC Shipment and Forecast Report). Or, are the comments to be taken at face value, that mini-notes are not a good solution as a replacement product, but are best for new PC users or as a secondary device? This is something that we at DisplaySearch have noted for some time in our coverage of the market. Mini-note PCs (also called netbooks) have had two different paths to success depending upon the market/region. The low price of mini-notes has dramatically lowered the entry barrier to PC ownership, with ASPs just above US$300, compared to the more than $700 ASP of more traditional notebook PCs.

Making a netbook with a 14″ or 15″ display is possible. Take all the typical netbook components and simply build them into a larger box with a bigger display. Should it be done? From a display component perspective, it makes little sense. Current market average pricing for 14.1″ and 15.6″ notebook displays is currently 1.6-1.7x that of 10.1″ mini-note displays. That is a $25 premium that would loosely translate to a $50 impact to the street price of the set. There are also additional costs for the larger enclosure. Additionally, both Microsoft and Intel define mini-notes as having a screen (display) size of 10.2″ or smaller. In industry-speak, this translates to pricing bands with both companies doing their best to discourage brands from using the lower priced components outside of these defined categories. While the pricing bands serve the purpose of protecting margins, they also help to manage expectations.

PC brands also must manage their customers expectations. With so many years of “bigger, better, faster, more” and “speeds and feeds,” consumers have come to expect a certain set of features in their notebooks. In larger (17″+) and more expensive machines, they expect higher resolution displays, discrete graphics, lots of storage, and multi-media performance, but they do not expect a 5 or 6 pound machine-the converse is true. Buyers that seek out thinner and lighter machines know that there are trade offs with size, weight and performance. And, mini-notes have sold very well because they lower the barrier to PC ownership, be it as a primary device for a first-time PC buyer or as a secondary device for a PC owner that might want to leave their 5 or 6 pound (or heavier) more full-featured notebook PC at home or the office when they travel.

So, was Mr. Dell being “sour” on the mini-note? I do not think so. He simply seems to be saying, know your computing needs and buy the PC that fits those needs. Good advice.