Why Intel’s Mike Dell And My Daughter Hate Me For Buying A New Computer

Netbook sales are up 264%. So why are all the PC guys sulking?

I am about to buy my daughter a computer for her birthday. But that’s not necessarily great news for anyone involved - her, her mother, the folks who are making the machine, or even the guys who are delivering it to us.

Oh, my daughter will be pleased enough when she sees the box. What she will find inside the Styrofoam peanuts will greatly resemble my high-end laptop she has been coveting (and frequently borrowing) for a year now. But it won’t be anywhere near as powerful, and it will only cost me about 10% of what I spent on my machine.

When she plugs it in, she will discover that her cheapskate, dictatorial father has purchased her one of those newfangled “netbooks.” It will have just enough computing power and memory to allow her to search Wikipedia, write reports for school, and chat with friends on Facebook.

It’s Basically a Fancy Abacus

No movies. No games (except maybe solitaire). I’m even getting it in basic black. If she wants to look cute, she can decorate it with Hannah Montana stickers, or whatever girls are into this week.

And if she tries to do anything at all with it after bedtime, she will be in for the rudest of shocks, because the one thing I am spending my hard-earned cash on is the biggest, meanest, locked-down “net nanny” I can load onto the thing. She won’t even be able to turn it on after 9 p.m., and it won’t go anywhere near “CuteBoys.com” without having a nervous breakdown.

I’m not particularly worried about this little moron of a computer embarrassing her in front of her friends. Whereas I do that a lot (it’s really not all that hard; all I have to do is appear anywhere near her when they are around, or, heaven forbid, speak out loud in front of them), I know for a fact that most of her friends are slated to receive similarly lobotomized “el cheapo” machines over the next few months.

In fact, these anemic little netbooks are the fastest-growing segment of the PC industry. Problem is, nobody’s making but so much money off them. And they are displacing most all other PC sales.

Dell Down On Netbooks

Dell (DELL) is having about as much success as anyone out there flogging these things. But at a recent dinner hosted by Silicon Valley’s Churchill Club, Michael Dell himself disparaged his own offering:

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. But as a replacement machine for an experienced user, it’s not what we’d recommend. It’s not a good experience, and we don’t see users very happy with those.

This is really quite incredible. This is a man in the middle of trying to rescue his company from years of mismanagement and the worst economic environment since the Great Depression. And he is positively savaging the one thing he is actually selling these days!

Losing a Nickel to Make a Dime

If you want to understand why Mike is so down in the mouth, you have to take a look at the latest quarterly profit figures from the guys who are providing the chips for Dell’s Mini. Just yesterday, Intel (INTC) announced that both sales and profits fell by some 8% in the third quarter of 2009.

We already know that sales are down for all segments except netbooks. Even though sales of Intel’s low-power Atom processor are rolling along, they don’t really make much profit off that particular line, as it costs just about as much to make these chips as any of their high-end products. But cheapskates like yours truly will only pay 10 cents on the dollar for them.

Most years, an announcement like this would be the death knell for share value. However, INTC actually rose some 4% yesterday morning because these anemic numbers actually beat expectations, and management promised to make more money somehow, sometime in the near future.

That’s why I have actually advised WOW readers to pick up some calls on Dell. And Dell’s chart looks like it has the same sort of growth in it. It doesn’t have to make horse sense, people. In fact, these days, it seldom does. It just has to work.

So Now I’m the Bad Guy Here

So I am buying a new PC, and by the time the dust settles, everyone will hate me for it.

My wife is all nervous about my daughter hooking up with middle-aged Internet lotharios. My daughter will be peeved when she realizes all the things she can’t do with her new toy. Mike Dell and the fellows over at Intel are ticked off because I am not buying anything they can make a lot of money off of.

Heck, even UPS is going to get the shaft on this deal, because I found a coupon online that will get me free shipping (and you can just bet that Dell is squeezing a piece of that out of the shipper.)

The only person who is making out on this deal is me, really, because I will finally get my damned laptop back. Hopefully, there won’t be hot chocolate all over the keyboard again.

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