Dell Computer Corp, which has been successful selling its personal computers directly to customers, plans to sell generic computers to dealers who in turn sell the PCs to small businesses, the company said Tuesday.
The so-called white box market is a new one for Dell, which continues to try to grab a bigger share of computer sales and revenue.
"Dell saw an opportunity," said company spokeswoman Amy King.
In the white box market, a dealer puts together computer parts to make and sell a customized machine, or resells generic computers. These kinds of sales account for about 30 percent of the PC market, according to IDC, a Framingham, Massachusetts-based market research firm.
Beginning tomorrow, Dell will sell unbranded personal computers known as White Box D510 to dealers who serve businesses with 100 employees or fewer, King said.
"It would appear to be a smart move for them having become the dominant player in the online direct consumer segment," said Dan Hess, vice president of comScore Media Metrix. "This strategy affords them a way to penetrate the still-significant percentage of consumers that is not fully comfortable purchasing a big-ticket item like a computer on the Web."
The price starts at US$499 for a unit with an Intel Celeron processor, CD-ROM and floppy disk drive and Windows XP. A monitor is not included and the PCs can be upgraded upon request. Each computer includes a one-year warranty on parts and telephone service for the dealer.
Selling the computers will allow the Round Rock-based company to make as much money as it would selling a Dell brand PC and is estimated to bring in about US$380 million, or 1 percent, of Dell's total revenue, King said.
King said Dell wanted to focus on local dealers who build or purchase unbranded PCs for small businesses because it realized the market has been quickly growing.
Small businesses typically cannot afford or do not have the technological resources to have internal IT departments and depend on the local dealers. Dell can help keep prices low for dealers while providing high-quality products, King said.
Competitor Hewlett-Packard Co said it was unimpressed with Dell's dip into the white box market.
"Small businesses won't be fooled. For a similar price, they can get superior branded products with real service and support," HP said.
Kevin Hunt, a Dell analyst for Thomas Weisel Partners, said Dell's move won't greatly affect competitors like HP. Dell's target may be white box sellers abroad, he said.
"They're starting to test a way they can go over the white box guys in other countries like in Asia because to get a bigger share they're going to have to go after those guys," Hunt said.
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