DeveloperSide.NET Blog

Having priced similar Dell Ubuntu and Vista systems in the past, at a real difference of 10 dollars, I was curious to check in again and see if Dell has implemented anything the users of IdeaStorm have asked for.

One particular thread caught my attention:
Ubuntu Dell is $50 Less Than Windows Dell — Implemented.

Lets take The Flavor Challenge and build two same-spec 1420 Notebooks:

Note “Jet Black [Included in Price]” on 1420 Ubuntu
Downgrade to “Jet Black [subtract $20]” on 1420 Vista

Note “FREE! 2GB Shared Dual Channel DDR2 at 667MHz [Included in Price]” on 1420 Vista
Upgrade to “2GB Shared Dual Channel DDR2 at 667MHz [add $150]” on 1420 Ubuntu

Note “FREE! 160GB SATA Hard Drive (5400RPM) [Included in Price]” on 1420 Vista
Upgrade to “Size: 160GB SATA Hard Drive (5400RPM) [add $125]” on 1420 Ubuntu

Note “Intel 3945 802.11a/g Mini-card [Included in Price]” on 1420 Ubuntu
Upgrade to “Intel 3945 802.11a/g Mini-card [add $25]” on 1420 Vista

Total:

Inspiron 1420 [Vista] $824
Inspiron 1420N [Ubuntu] $1,049

The people asked, and Dell delivered! And only at $225 more for the Ubuntu laptop!

Say this with me: Dell has no intention of selling non-Windows consumer and commodity PCs/Notebooks. They simply can’t as the net profit on a Dell system is derived directly from the Windows OS via “Desktop Real Estate” and any Microsoft leads and co-marketing funds [kickbacks] provided — and not from the base hardware.

The Linux community is being used to generate free publicity and in turn sell Windows Licenses.

A bit ironic, don’t you think so?

Update 07/11/07:

The given components and prices on the 1420 Notebook have been updated. The price difference is now $25 [assuming no change in Wireless NIC], in favor of the Ubuntu system.

Among frequent price and component discrepancies, price fluctuations, and Windows favored promotions, I’m not sure if Dell is serious about selling “open-source” [as Dell calls them] systems, rather than generating publicity.

Considering that expected sales are at 1% of total systems shipped, and that Microsoft could break Dell in half by decreasing the received Windows License discounts and co-marketing funds, I have no choice but to assume the latter.

Update 04/30/10:

Seems like its back to $200 again.

It’s great that Linux is finally getting the exposure it deserves, thanks to Dell, but the question still remains: how is Dell profiting from its Ubuntu offering?

We know that the net margin for Dell, as a whole, is around 5% [the true profit made on revenue]. While we can compare this number to the industry standard, it does not tell us anything about the margins Dell pockets on its commodity PC and Notebook lines.

Per system, it is rumored to be around 2% or less and to be razor-thin and ever decreasing.

Considering that Dell pays $25-$45 per OEM volume XP/Vista license and profits $45+ from the “Desktop Real Estate” provided by Windows, where is the profit made when a Ubuntu system is priced less than it’s Windows counterpart?

Surely not with the upgrades that are either lacking or similarly priced [that sometimes cost more].

Publicity.

The profits made on selling Ubuntu systems at cost, or even at a loss, is with the free publicity Dell is generating for itself via major news and social network sites around the net regurgitating on this deal literally every few days. This in turn generates traffic and sales on profitable items, such as the Windows systems, for Dell.

Just don’t get too excited, because this is old news [circa 2004]. And something that is currently being rehashed as new on Digg, Slashdot, and Linux sites…

I’m sure you have seen it too: the news along the lines of “[insert random OEM here] releasing incredible Linux offers”, quickly followed by naive comments proclaiming the end of Microsoft.

The fact is, OEMs and companies like Wal-Mart have been attempting to sell Linux based PCs and Laptops/Notebooks for years. Take a look:

• Sept. 14, 1999 Is the IBM Thinkpad now Linux-friendly?
• Spring 2000 Dell Delivers Linux! [Archive.org]
• June 17, 2002 Wal-Mart trims prices of Linux-based PCs
• May 12, 2003 HP “people’s notebook” runs Linux
• July 22, 2004 Toshiba Windows media laptop plays with embedded Linux

Unfortunately, most of these attempts have resulted in complete failure or extremely small volume [Wal-Mart couldn't even sell 1000 of those Laptops]. And every few years, the waters are tested again, with the same exact outcome.

Lets face the truth: Linux does not work for the average consumer, it never has, as “choice” is not something that consumers are looking for. Familiarity, function, and eye candy are the determining factors here.

As “Linux” is not synonymous with “Wal-Mart”; it neither is with “Desktop.”

See more for yourself at the Google News Archives and here.