Dell’s dropping the 12-inch Netbook

Dell confirmed today that it’s dropping the 12-inch Inspiron Mini 12 netbook. There’s a lot of gobbledygook on the Direct2Dell blog justifying the decision – “for a lot of customers, 10-inch displays are the sweet spot for netbooks… Larger notebooks require a little more horsepower to be really useful”   but that’s all hogwash.

Here’s what’s happening.

Intel wants to segment the market: they want to keep netbooks clearly differentiated from notebooks. Why? Profit. In the World According to Intel, Netbooks run on the much-lower-profit-margin Atom chip, and Intel really has to fight in that market. Notebooks, on the other hand, run on a much-higher-margin Dual Core chip. Intel wants to keep the two markets highly differentiated, because the more they’re blurred, the greater the pressure on profits.

This is the same economic force that drove Microsoft to limit the screen size of netbooks running Windows 7 Starter Edition. I talked about that in my June 4 Top Story in Windows Secrets Newsletter. As I said then:

Microsoft will sell copies of Starter Edition to PC manufacturers only for installation on netbooks with limited processing ability. That’s defined as those using a single-core processor, running slower than 2GHz, consuming fewer than 15 watts, having less than 1GB of system memory, and using screens 10.2 inches or smaller… “People familiar with the matter say Microsoft takes in less than $15 per netbook for Windows XP once marketing rebates are taken into account — far less than the estimated $50 to $60 the company receives for PCs running Windows Vista.”

Some people see conspiracies behind every Microsoft move, and the Starter Edition hardware throttling is no exception. Certainly, by restricting Starter Edition to netbooks with screens smaller than 10.2 inches, companies planning to build netbooks with larger screens will face higher prices and, probably, lower margins.

Intel and Microsoft teamed up to set the 10-inch limit on netbooks. It looks like their, uh, collaboration is working – at least with Dell.