More on Dell's Notebook Strategy ..
Dell Makes It In Portables, So It's Time To Branch Out
Investor's Business Daily
Date: 11/2/98
Author: Nick Turner
Dell Computer Corp.'s notebook-computer business has made it to the big leagues on the strength of sales to corporate customers.
So what's Dell going to do now? Aim its latest mobile products at small business and consumers, of course.
To Dell, the strategy makes sense if it wants to keep growing. Market leader Toshiba Corp. of Japan is known for a slew of models - from a minuscule sub-notebook to a hefty desktop replacement. Compaq Computer Corp., which Dell is challenging for the second spot in U.S. markets, has been racing to match Toshiba's breadth.
So now that Dell is among the leaders, it wants to stay there. According to Dataquest Inc. of San Jose, Calif., Dell holds the No. 2 U.S. mobile PC sales slot, ahead of Compaq. International Data Corp. in Framingham, Mass., has it at No. 3, just behind Compaq.
''Dell has entered people's minds as a safe, sound portable brand,'' said Bruce Stephen, an IDC analyst.
Round Rock, Texas-based Dell will announce a new notebook on Monday for small business and home users. The Inspiron 3500 will start under $2,000 and comes with a three-year warranty, which is rare in the notebook field.
Dell has made other moves recently in this direction. In September, Dell introduced a higher-end machine called the Inspiron 7000, also targeted at small businesses and home buyers.
Dell began selling notebooks in '91 and grew rapidly on the strength of one product platform, the Latitude, designed for large and midsize businesses. Latitude accounts for the bulk of Dell notebook sales.
By limiting the number of models, Dell produced its notebooks more cheaply than competitors, analysts say. Dell also relied on industry-standard technology, instead of pioneering its own. And Dell sells directly to customers, cutting overhead costs.
But success has necessitated some changes. Dell began branching out about a year ago when it launched its Inspiron line. And it's taking some chances with technology innovation. The Inspiron 7000, for instance, comes with a 15-inch screen. Dell is the first major manufacturer to offer that feature.
Company officials stress they're not looking to match their rivals in every realm. While Toshiba leads the market in variety, and IBM Corp. is considered tops in innovation, don't look for Dell to challenge them on those fronts.
''Are we ever going to out- platform Toshiba or out-design IBM? No. Nor should we,'' said Tim Peters, director of Latitude marketing for Dell.
Dell's advantage, company officials say, is its direct relationship with customers. It only adds technology when it knows buyers want it.
''The closer we get to our customers, the more we are able to translate their needs into key technologies,'' said Paul Kirchoff, Inspiron product manager.
Company officials say they divide small-business users and consumers into two categories. There are those who want a notebook to replace their desktop computer. Others emphasize a device that's easy to carry around.
''We have almost equal amounts of customers in the two different camps,'' said Kirchoff.
The Inspiron 7000 is designed to be the desktop replacement. The 15-inch screen is almost the equivalent of a 17-inch desktop monitor. Flat-panel displays used in notebooks have a wider viewable area than the curved cathode-ray tubes found in monitors.
The machine also sports a DVD- ROM drive, floppy drive, up to eight gigabytes of hard-drive space, 64 megabytes of memory and a 333-megahertz Pentium II processor.
The price tag does set the Inspiron 7000 apart from a desktop PC, though. At $2,999, it costs more than a desktop model with a faster processor. It's also bulkier than the average notebook. It weighs almost nine pounds and is 2.5 inches thick.
Dell figures customers looking for something slimmer - or cheaper - will consider the Inspiron 3500. The 3500 weighs a little more than six pounds and measures 1.5 inches thick.
Instead of packing in all the standard components, it has bays that let you swap drives in and out. The cheapest version of the Inspiron costs $1,999.
Dell also hopes to make service a selling point. It offers three-year warranties on its Inspiron computers. Typically, buyers keep notebooks for two to three years, Kirchoff says.
''When you're pushing the direct relationship between Dell and our customers, the logical next step is to really take care of them through the end of use of their product,'' Kirchoff said.
While Dell doesn't compete at the low end of the market, analysts agree it often gives better deals on high- and medium-end fare.
The market has matured to the point where it's most important to have the best price-performance combination, says Dell's Peters. Bells and whistles are nice but not crucial, he adds.
''It's pretty straightforward,'' Peters said, ''but in a commodity market, where's the technology benefit?''
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