How does Dell do it?
I suppose the bigger question is how much money they are losing on each laptop purchase, and will prices go up once they've garnered a larger market share?
Currently, Dell is running a special on their Inspiron 6400 line of laptops (expires tomorrow) for Small Businesses. Their 6400 with a DuoCore processor (1.6Ghz), 1GB ram, 80GB hard drive and DVD+/-RW (Dual layer even) is starting at
$604 $699. I ask again, how can they do that without taking a loss on each sale? Or compromising quality? That's a pretty darn low price for a laptop, and though the Inspiron's are really geared more towards home users, I like them and like the way they look. They are a little bigger and heavier than their Latitude counterparts, but Dell has been touting these as desktop replacement systems, so probably the thinking is that you won't have to lug it around as much. Even if you do, at ~6lbs, it really isn't that bad.
My Father-in-law recently experienced a problem with his Inspiron 6000 where the network card was having issues. That escalated into more severe problems that seemed to point to a faulty mainboard. It's finally getting fixed, but it does sort of highlight the above question, though I know several other people that own Inspiron 6000's (my mother being one), and haven't heard of any widespread issues with them.
One thing to note is that the default warranty that comes with these laptops is a 1 year economy on-site warranty, so perhaps that is part of why the low cost. However, I'm a firm believer that if there are going to be serious problems, they will usually crop up fairly early.
Bottom line here is that if you are in the market for a mid-level laptop, it looks like Dell wants your business pretty bad.
Update: The price has been changed and is now $699, not $604. Possibly it was a pricing mistake.