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Dell Hits the Sweet Spot in Media Center Notebooks

Dell is driving down prices on Media Center notebooks with the introduction of its new M140 to its consumer-focused XPS notebook line. Featuring a 14W chassis and Microsoft’s Windows Media Center Edition (MCE) OS, Dell’s M140 line has a starting price of $999. The Dell M140 will be available in November 2005.

The M140 is Dell’s most recent addition to its XPS family. In September 2005, Dell launched a campaign around its XPS brand to reposition the XPS- brand from solely a gaming centric device to include a comprehensive array of high-end, home entertainment offerings. In conjunction with the new brand campaign, Dell launched a new service package for the XPS systems including a one year warranty, a dedicated phone line and sales representatives resul ting in reduced hold times for XPS customers, an online chat forum and XPS-trained technicians. Dell’s XPS notebook family now includes two product lines, the 17W M170 and the 14W M140, Media Center notebooks.

Dell’s new M140 line features a range of Intel’s Pentium-M 700 series processors, Intel’s GMA 900 graphics processor with integrated VRAM, XP Media Center Edition OS, a standard six-cell battery, and a weight of 5.47 pounds. In addition, Dell’s M140 features a 5-in-1 media card reader and instant-on functionality through its MediaDirect technology. The Dell M140 does not come with an integrated TV tuner, but there is an option to upgrade for $130.

Dell has upped the ante now offering two sub-$1,000 Media Center notebooks, XPS M140 and Inspiron 6000, in the consumer notebook market. This is a significant milestone for the Media Center notebook, which has seen little consumer acceptance in the consumer notebook market — until now. Media Center notebook sales have thus far been stifled by the significant price premium they carry over other notebooks. However, Dell’s plunge into the sweet spot of mass-market price points will push Media Center notebooks into the hands of mainstream consumers.

In order to hit these low price points in its luxury XPS-brand, Dell has incorporated the Media Center operating system into a mainstream 14W form factor and has not included an integrated TV tuner. This design goes against the current notebook trends, in which manufacturers’ add Media Center operating systems to their larger 15W or 17W desktop replacement models in order target customers who want to watch and record TV on their PC. However, the current trend of Media Center sales in the U.S. retail desktop market begs the question: How are consumers utilizing the Media Center operating system? Recent sales surges of Media Center PCs sans TV tuners in the U.S. retail desktop PC market suggests that consumers are primarily using the Media Center operating systems to store and share their digital libraries, and not to watch TV on their PCs.

This data suggests that Media Center notebooks do not need to feature large screens, but simply need to be priced appropriately for the mainstream market. Dell nails this latter point with its XPS M140 ASP of $999, which is lower than the average selling price of a notebook in the U.S. retail notebook market ($1106). By offering sub-$1,000 Media Center notebooks, Dell will shift the way competing manufacturers will begin to incorporate Media Center operating systems into their mainstream designs.

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However, not only will Dell challenge the overall Media Center notebook market a sub-$1000 XPS-branded notebook line, but Dell’s M140 is a direct attack against HP’s dv1000 line. Both Dell’s M140 and HP’s dv1000 line feature 14W chassis design and are tagged as an entertainment PCs. HP’s line includes instant-on technologies with HP’s QuickPlay, and the occasional SKU also includes a TV tuner in the box. Dell also features instant-on technologies with Dell MediaDirect and raises the bar with incorporating the Media Center operating system into its base model.

HP’s dv1000 features both a pre-configured and a configurable model, neither of which offer Window’s Media Center. Only HP’s 17W zd8000 line offers an upgrade option to the Media Center OS for an additional $199 (including a dual tuner). In a head-to-head comparison, HP’s dv1000 with the XP-Home operating system is more expensive than Dell’s base M140 model. When configured similarly, HP’s system costs $1,069 after a $50 mail-in rebate, and Dell’s M140 is priced at $999. This is a huge win for Dell as HP’s 14W dv1000 line is a key model for HP’s consumer product line. In September 2005, HP’s dv1000 line accounted approximately 30% of its Pavilion-branded sales in the U.S. retail notebook market.

Dell’s new price point for its 14W Media Center notebook is going to have a ripple effect across the notebook industry. Unlike other manufacturers, Dell is offering a $999 Media Center without any special limited time promotions. Manufacturers are going to need to follow suit and offer Media Center notebooks with both tuner and tuner-less options to target a broader range of customers. If HP plans to continue to emphasis the entertainment functions of its dv1000 line, than it will need to also include a Media Center option. HP could leverage a Media Center op ti on in its dv1000 line to differentiate the 14W Pavilion line from its sister Compaq Presario V2000 line.

Dell’s XPS M140, with its combination of high end feature sets including Media Center OS and VIP service offering at a $999 price point, brings a new dimension to the 14W notebook market. This product will quickly steal share from the fast growing 14W notebook market.

Dell Media Center notebooks will lead the transformation in how manufacturers integrate Media Center OS into their systems. Notebook manufacturers will be pressured to follow suit and offer Media Center options at aggressively low price points.

By Nicole D’Onofrio

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