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Dell Tries Selling In Kiosks, on TV As PC Sales Drop

Wall Street Journal; New York, N.Y.; Dec 20, 2001; By Gary McWilliams and Kortney Stringer;

|Edition:  |Eastern edition |

|Start Page:  |B.1 |

|ISSN:  |00999660 |

|Subject Terms:  |Personal computers |

| |Kiosks |

|Companies:  |Dell Computer CorpTicker:DELLDuns:11-431-5195Sic:334111Sic:334111Duns:11-431-5195 |

Abstract:

This year, in a sharp departure from its past, Dell is putting its personal computers in places and markets it has long shunned. The biggest seller of PCs to businesses has quietly set up Dell Direct retail-store kiosks at shopping malls in Franklin, Tenn., and Frisco, Texas, where Ms. [Sarah Bishop] recently studied a sleek, black PC. Dell's founder and chief executive, Michael S. Dell, has hawked PCs on a cable-shopping channel. And it has begun targeting the bargain-basement crowd with a $599 computer package similar to those found at warehouse clubs.

In its biggest pitch to the masses, Dell recently began selling a low-cost, pre-built machine made by a Taiwanese manufacturer. The $599 price is Dell's first approach to buyers who prefer off-the-shelf machines over Dell's traditional made-to-order practice. Mr. [John Hamlin] says sales of that machine are "meeting expectations."

Dell's Mr. Hamlin insists it isn't following Gateway and Apple Computer Inc. in opening company-owned stores, or following H-P and Compaq Computer into selling via retail chains. Indeed, outside of the seven states where it has employees, Dell doesn't collect sales tax on home sales made via the phone or Internet. Customers in those states where Dell has no employees are expected to voluntarily pay their own sales tax, giving them an immediate savings over retail stores.

|Full Text: |

|Copyright Dow Jones & Company Inc Dec 20, 2001 |

FRISCO, Texas -- Sarah Bishop wouldn't normally be a customer for Dell Computer Corp. She finds ordering a computer over the phone or Internet too impersonal. "I have to be able to look at it and test it out," says the 19-year-old Arlington, Texas, woman.

But this year, in a sharp departure from its past, Dell is putting its personal computers in places and markets it has long shunned. The biggest seller of PCs to businesses has quietly set up Dell Direct retail-store kiosks at shopping malls in Franklin, Tenn., and Frisco, Texas, where Ms. Bishop recently studied a sleek, black PC. Dell's founder and chief executive, Michael S. Dell, has hawked PCs on a cable-shopping channel. And it has begun targeting the bargain-basement crowd with a $599 computer package similar to those found at warehouse clubs.

The moves reflect the Austin, Texas, company's bold push into the home-PC business despite the dreadful state of the market. Indeed, retail PC sales during the big Thanksgiving weekend dropped 10% below the depressed level of a year ago, according to market researchers. Annual home PC sales in the U.S. are projected to drop a sharp 21% this year, prompting many home-PC companies to discount heavily.

Dell may be trying to take advantage of moves by some competitors to retrench from the cutthroat market. Moreover, Dell is hitting the consumer market with new vigor at the same time home-market leader Hewlett-Packard Co. may be distracted by its troubled attempt to acquire Compaq Computer Corp., another big consumer-PC company.

Of course, Dell isn't a total newcomer to the home market. The company began 18 years ago when Mr. Dell sold computers to students from his University of Texas dorm room. Soon thereafter, the PC company shifted its attention to corporate buyers. As a result, sales to the home represent just 15% of Dell's $32 billion in annual sales compared with an average of 24% of rivals' revenue. But with corporate computer markets weak, the company this year is looking to the home, education and government markets to lift sales.

"We have to continue to find ways to reach that next group of customers," says John Hamlin, Dell's vice president of U.S. consumer products.

That mandate put three salesmen in company-blue polo shirts beneath a Dell Direct Store sign on a recent afternoon here. They manned a large kiosk displaying PCs, hand-held computers and digital cameras.

Ray Worlock, 51 years old, was shopping for a replacement to a three-year-old PC. "It's nice to be able to picture what the computer will look like in your home or on your desk," he said while cruising through a store that will be open through January. While he didn't buy that day, Mr. Worlock left the kiosk clutching Dell sales brochures.

Malls are just one new place Dell is venturing to reach the home market. Mr. Dell recently made a personal pitch to viewers of QVC, the Comcast Corp. cable-shopping channel, which was offering a package including a PC with a Pentium 4 chip, a DVD, rewritable CD drives, a 19-inch monitor and a printer-scanner-copier combination. While QVC wouldn't disclose sales figures, it said the $2,000 and up Dell PCs were its most popular item on a day that it tallied $80 million in total sales, the largest in its history.

In its biggest pitch to the masses, Dell recently began selling a low-cost, pre-built machine made by a Taiwanese manufacturer. The $599 price is Dell's first approach to buyers who prefer off-the-shelf machines over Dell's traditional made-to-order practice. Mr. Hamlin says sales of that machine are "meeting expectations."

So far, such unusual moves appear to be working. In its fiscal third quarter ended Nov. 2, Dell's consumer revenue rose 17% on a 39% increase in units sold. Analysts project its consumer business will outperform rivals this holiday. Steven M. Fortuna, a Merrill Lynch computer analyst, says Dell's consumer business "got off to a strong start" and predicts its fiscal fourth-quarter home sales could rise at least 26% from the third quarter.

Dell's share of the U.S. home PC market rose to 16.6% last quarter, just behind H-P's 17.7%, says market watcher International Data Corp., Framingham, Mass. Rob Wait, H-P's marketing manager for home PCs, says Dell's moves to mimic retail sales illustrate the limits of purely direct sales. "We're maintaining our number-one place right now," he says.

Joe Burke, the Gateway Inc. senior vice president who devised its chain of retail stores, scoffs at what he called the company's "toe-in-the-water" retail effort. "We tried this ourselves around the holiday season a few years ago," Mr. Burke says. "It was good exposure but it just didn't produce the [sales] volumes to justify the cost," he said.

Dell's Mr. Hamlin insists it isn't following Gateway and Apple Computer Inc. in opening company-owned stores, or following H-P and Compaq Computer into selling via retail chains. Indeed, outside of the seven states where it has employees, Dell doesn't collect sales tax on home sales made via the phone or Internet. Customers in those states where Dell has no employees are expected to voluntarily pay their own sales tax, giving them an immediate savings over retail stores.

Credit: Staff Reporters of The Wall Street Journal

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