EKS <<"If CPQ is going to compete as both a box maker and integrator, they are going to have to significantly expand their current service model so they can compete (and win contracts) with the likes of CSC ($7 Billion in annual revenues), EDS and IBM.
This is where the real money is going to be made going forward.">>
It looks like being a boxmaker is going to have much more competition from DELL. CPQ looks very weak on all fronts.
Monday June 14, 12:00 am Eastern Time
Dell to unveil new consumer PCs
starting at $899
By Eric Auchard
NEW YORK, June 14 (Reuters) - Dell Computer Corp.
(Nasdaq:DELL - news) said it plans on Tuesday to unveil new
lower-priced personal computers starting at $899, in a bid to step up
its attack on the consumer PC market while overcoming its
resistance to selling PCs at bargain-basement prices.
The Round Rock, Texas company, the top direct seller of PCs, said
it would offer its new Dimension L series PCs running low-cost Intel Corp. (Nasdaq:INTC - news)
Celeron chips at prices starting at $899, or $27 per month under a four-year financing plan.
Dell considers the $899 machines competitive with PCs from other name-brand makers priced below
$599 that typically offer only PC boxes but sacrifice key components like color monitors, multi-year
warranties, software and services.
The new PCs mark the latest careful steps by Dell into the sub-$1,000 desktop market -- the price
level many consumers now expect to pay for a Celeron-based home PC. Most Dell PCs run
high-powered Pentium chips and are priced considerably higher.
''While most of our customers continue to buy performance-class PCs with Pentium III processors,
others want a second, low-cost PC with the service and support Dell is known for,'' Paul Bell, senior
vice president of Dell's home and small business group, said in a statement obtained Sunday.
Until this spring, Dell resisted the industry's move to price PCs below $1,000, focusing instead on sales
of higher-power machines for customers willing to pay more. Rivals Compaq Computer Corp.
(NYSE:CPQ - news) and International Business Machines Corp. (NYSE:IBM - news) offer PCs
ranging as low as $499 to $699.
''This shows that Dell is not willing to get relegated to the high-end of the market and get squeezed out
of the mass market,'' said Van Baker, a PC analyst with market researcher Dataquest, who had been
briefed on Dell's plans.
Dell's push into low-cost PCs marks a bid by the computer maker to step up growth in consumer and
small business markets, each of which represent about 15 percent of total company revenues.
Corporate PC sales constituted the other two-thirds of Dell's $18 billion in annual revenues last year.
As a result of its focus on selling higher performance machines to repeat customers, the average
selling price of a Dell PC remains around $2,300, significantly above its rivals. But in order to tap this
high-volume PC market, Dell is now showing itself willing to join the lower-price fray.
Dell ranked No. 4 in the U.S. consumer market behind Compaq, Gateway Inc. (NYSE:GTW - news)
and Hewlett-Packard Co. (NYSE:HWP - news) in the first two months of 1999, according to
Trendata, a report on household PC buying by Ziff-Davis market researchers. Dell is the No. 1 seller
of PCs to U.S. small businesses and No. 2 in overall PC sales worldwide, surveys show.
Dataquest's Baker said Dell has a ready audience among its existing customers, who may be in the
market for a second PC, but for which Dell had little to offer them -- until now.
''The loyal Dell following has not had a low-cost PC to buy from Dell,'' he noted of the company's core
customer base.
For $899, a Dimension L400 comes with a 400 megahertz, or million cycle per second, Celeron chip,
and moderate amounts of computer memory and hard disk space. It also includes a compact disk
player, speakers, a Microsoft Windows 98 operating system and the MS Works Suite 99 software for
word processing, graphics and other key functions.
The PC also has an expandable chassis that provides access to internal components for future
upgrades -- in contrast to most sub-$1,000 PCs that are built for one-time use only.
Dell said it will begin taking orders on Tuesday for its new Dimension L series, which include 400
megahertz, 433 megahertz and 466 megahertz Intel Celeron processors.
The company expects to ship the new L series by late July, in line with other PC makers who have
begun announcing similar families of PCs ahead of the back-to-school purchasing season. Last week,
for example, IBM unveiled consumer PCs starting at $799, with monitors, along with higher-priced
notebook PCs.
Dell offered sample set-ups of a 433-megahertz PC priced at $1,230 and a 466-megahertz Celeron
machine loaded with features such as a high-resolution, 15-inch flat panel monitor and a version of
Microsoft office software priced at $2,199.
Like other PC makers, Dell is looking beyond the purchase of the box itself to follow-on sales of
related software, peripheral products and services in order to bolster the ever tightening profit margins
on the lower-priced PCs.
Eventually, many analysts expect Dell to match its rival Gateway by charging for Internet access
services on each PC sold in return for lower-cost, upfront pricing on the PCs.
Further details will be available Tuesday at Dell's web site at dell.com
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