Michael Dell: Telcos may subsidize netbooks to sell 3G

Dell CEO Michael Dell said he expects netbooks to eventually be subsidized by wireless telecom carriers that would sell the devices along with 3G service.

The comments, made at the Citigroup Technology Conference on Wednesday, could shed some light on Dell's strategy as it announces a new netbook tomorrow. Dell's conundrum: The company will enter the netbook market soon, but has to keep margins up somehow. Dell has come under fire for weaker than expected gross margins.

According to Citigroup, netbooks will account for about a third of global notebook sales. CEO Dell reiterated the common refrain in the PC industry: Netbooks will be a second or third machine in the developed economies and the first PC for emerging markets. "(Netbooks are) a market expansion. We won't see a lot of people trading down 15 inch notebooks for 9 inch notebooks," said Dell, referring to the U.S.

Also see: The Netbooks are coming: Laptop cannibalization today; Smartphone war tomorrow?

When asked about Dell's margins on netbooks, the CEO said he would expect telecom carriers to subsidize them in order to sell 3G and later 4G services. "Telcos will embrace it. It's the type of product that could easily take advantage of data," said Dell.

In other words, Dell plans to emulate the cell phone model as it launches into netbooks. Other odds and ends:

• Dell was asked about whether the company feels compelled to make a big acquisition given HP was buying EDS. Dell shot down the idea. However, he did hint at future software and services acquisitions. "Software and services will be important to our future," he said. "But I wouldn't be holding my breath for a large acquisition."
• On whether Dell would enter the PDA/cell phone market to target the iPhone, the CEO said we shouldn't expect anything "in the near term.