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To: The Duke of URL© who wrote (66968)	8/25/1999 7:22:00 AM
From: Kenya AA	Read Replies (1) \| Respond to of 97611

Business-Focused Dell Zeros In On Consumers Date: 8/25/99 Author: Nick Turner for IBD Even without cow spots printed on its packaging or costly TV ads aimed at consumers, Dell Computer Corp. has milked the home for big market gains. In the quarter ended July 30, the company said its personal computer shipments to consumers doubled from the year- ago period. Gateway Inc., which like Dell markets PCs directly to customers, still sells more home computers. But Dell is growing faster in that market, say analysts. And it's making these big inroads without developing a consumer-friendly image for the public. ''Dell isn't using the warm-and-fuzzy consumer approach that Gateway uses,'' said Schelley Olhava, an analyst at Framingham, Mass.-based International Data Corp. North Sioux City, S.D.-based Gateway, playing up its middle- America roots, prints cow spots on its cardboard boxes. TV ads show company founder Ted Waitt setting up a computer for his dad. With Dell, you'll see none of that. Dell's bread and butter has been - and remains -business users. The company has run a few ads for consumers on cable TV. But most of its commercials show few home users, favoring images of CEOs and other professionals. So how has Dell managed to score with consumers? Its strong position in the corporate market has helped. When it's time to buy a PC for the home, many shoppers immediately think of the brand of computer they use at work. Web Strategy Dell's gains with consumers also stem from its Web strategy. Round Rock, Texas-based Dell has emerged as an online success story. Getting consumers to come to the company's Web site has been more important than cultivating a TV image, says Paul Bell, general manager of Dell's home- and small-business group. ''TV advertising is great for getting everybody's attention. But the business we're in -the direct selling of computers - is about getting customers to contact you, either by going to the Web or calling on the phone,'' Bell said. ''We found there are far better ways to do that than advertising on TV.'' Print ads heavily promote Dell's Internet address. And the company's banner ads are prevalent on the Web, meaning its site is often just a mouse click away. Dell's taken an aggressive tack in drumming up Web business. The company uses so-called ''affiliate'' programs. It contracts with other Web sites to put links to Dell's pages. If a Web surfer uses that link and buys something from Dell, the partner Web site gets compensated. Dell officials won't say exactly how much money changes hands. ''It's a great new vehicle in marketing that we're pioneering,'' Bell said. Dell's brand image may not be as consumer friendly as Gateway's. But its name recognition is rising dramatically. A few years ago, the company asked recent PC buyers whether they had heard of the Dell brand. Only about a third had. When the company repeated the survey six months ago, nearly all respondents knew of Dell. Brand Power ''They have a powerful brand,'' said Mark Specker, an analyst at SoundView Technology Group in San Francisco. ''They're a very visible Web merchant.'' Dell has been rapidly expanding its Web empire. In March, it began selling peripherals and software through its site called Gigabuys.com. In July, in the style of EBay Inc., Dell added an auction site. Customers can use the service to sell off their old computers. Half of the company's consumer-PC sales are generated online, Dell officials say. Overall, the company says it generates sales of $30 million per day over the Internet. That represents about 40% of Dell's revenue. For its second quarter, Dell said per-share earnings rose 58% to 19 cents from 12 cents in the year-ago period. Sales rose 42% to $6.14 billion from $4.33 billion. Yet, much of the buzz in the consumer-PC market surrounds giveaway deals, while Dell dwells in the higher-end market. PC makers, often working together with Internet service providers, are giving buyers huge rebates on home computers when they sign up for long-term ISP service. In some cases, rebates cover the entire cost of a PC. Even without rebates, PCs are widely available for less than $400. Shunning The Low End Dell's avoided the low end of the market. Its cheapest computer costs $899. But customers still get a good value with Dell, analysts say. The technology is more up-to-date. And, like Gateway, Dell offers a year of free Internet service with its home PCs. Plus, though Dell machines are more expensive than the low-end fare from EMachines Inc. and others, they're priced in line with Gateway. Dell's prices likely will creep down some more, analysts say. But analysts expect the company won't sacrifice its profit margins. ''Dell's entering the market on their own terms,'' said Dan Niles, an analyst at BancBoston Robertson Stephens in San Francisco. ''They're staying where they still have a fair amount of profitability.''