Dell plays defense with Mini 9 Netbook

This post was updated at 12:30 p.m. PT to reflect Dell's announcement of partnering with Vodafone.

A year after the Asus Eee PC began aggressively marking territory in the low-cost notebook business, the second-biggest PC maker in the world is finally ready with an answer.

The Dell Inspiron Mini 9 will be formally announced Thursday, as CNET News reported Tuesday. It's Dell's first foray into the Netbook category--undersize notebooks powered by Intel's Atom processor.

Hewlett-Packard, Acer, and seemingly hundreds of lower-tier players jumped in months ago to what has been certainly the most interesting development in the PC business in some time. But is it too late for Dell to make a meaningful impact in the category? Furthermore, is it even necessary for Dell to participate?

Whether this category has much potential for significant growth depends on who you ask. Gartner is predicting 5.2 million Netbooks will sell this year, but reach 50 million in 2012. Rival firm IDC has a vastly different view: 3.5 million this year, 5 million next year, and 9.2 million by 2012.

The category can be confusing for the average PC user. A Netbook is essentially a notebook form factor shrunk down, but these devices don't act as the average PC user would expect. It has a smaller screen, smaller keyboard, lower storage capacity, among other things.

That's why Dell is taking pains to reframe consumers' expectations of this type of device, and is throwing in a few different options.

"We didn't build a small PC, we built an ultramobile device," said John Thode, vice president of small-screen consumer devices for Dell. "It does a lot of PC functions, but its intent was not to emulate a PC in every aspect."

Managing the expectations consumers have of a device in this category is a good idea, but it doesn't change the fact that it falls into the category of a Netbook. (CNET Reviews like what the Mini 9 offers as a Netbook, and for a full rundown of the specs, plus a hands-on review, see here.)

Price is the other reason for the reframing. Dell hopes to sell this as an oversize Blackberry or iPhone--a mobile device that you use simply to access the Web for short spurts, send e-mail, make some VoIP calls. When the cheapest version of the Mini 9 goes for $349 (4GB SSD, Ubuntu Linux), and the full loaded one (16GB SSD, Windows XP, Web cam, etc.) goes for $599, that almost reaches the same price category as Dell's full-size traditional notebooks. A 15-inch Inspiron, for example, starts at $499, according to Dell.com. By selling it as "not a small notebook" there's less risk of losing sales in their traditional notebook business at the expense of Netbooks.

Although Netbook brands are pretty hard to tell apart these days, Dell has made some smart moves here with the product itself: offering free online storage with Box.net, and adding a lot customization options.

But from a business strategy perspective, it's not clear how helpful this will be to Dell overall. It's having some issues straightening out the core part of its business, as its latest earnings results showed, so why are they spending time trying to figure out a whole new product category?

It seems to be the company's new strategy: try everything, see what works. Netbooks are just the latest product category in which Dell is jumping into because it doesn't want to lose out on any potential business.

But Dell's not alone here. When it comes to Netbooks, everyone's doing it because, well, everyone's doing it.

"It's defensive. Everybody's doing this because they don't want to miss out on any opportunity," said Richard Shim, PC analyst with IDC. "But they might be chasing the wrong rabbit."

In other words, if falling prices of traditional notebooks are a problem, why not innovate there? Come up with something interesting enough, and you'll grab attention from your competitors.

Dell is hoping to try something different in the category that will take care of the issue of low margins on these devices. Soon Vodafone will offer the Mini 9 with built-in mobile broadband when customers sign up for a 3G service plan with them. It's only for Europe now, and won't start until later this month. Dell declined to offer further details on pricing or in which countries the plan will be available.

But will that twist spell much-needed success for Dell? The subsidized notebooks-with-wireless-access model has already become popular in Europe, and though we've seen it here in the U.S. before, but it hasn't really stuck.

"The general trajectory is it initially starts off steep and fast, and then it tends to peter out and lose momentum," said Shim of IDC. "I don't see that changing because the reason it flattens out is because it's just not sustainable."