- The Washington Times - Thursday, May 24, 2007

NEW YORK (AP) — In a departure from the direct-to-consumer business model it was founded on, Dell Inc. plans to sell computers at Wal-Mart Stores Inc., the world’s largest retailer.

A Dell spokesman said yesterday the computer maker will begin selling two models from its Dimension desktop computer line in about 3,000 Wal-Marts beginning June 10.

The two Dimension E521 models will be sold at Wal-Marts in the United States, Canada and Puerto Rico. Dell said it could not reveal specific prices yet. On its Web site, the cheapest Dimension E521 costs $359.

Since its founding in the 1980s, Dell has relied on selling PCs and other products directly to consumers and business customers over the phone and Internet. It viewed direct sales as an important cost advantage over competitors who sold computers through retailers.

The strategy worked, helping Dell become the world’s leading PC maker. But last year, the Round Rock, Texas, company lost its lead to a revitalized Hewlett-Packard Co., which now sells systems online, by phone and in stores.

Dell’s disappointing financial results led to the ousting of Chief Executive Officer Kevin Rollins in January. He was replaced by founder Michael Dell, who in the 1980s laid out the company’s core model of building computers as customers ordered them, holding only a few days’ worth of components in inventory.

Morningstar analyst Rick Hanna said Mr. Dell was “the right person” to adjust the company’s strategy.

“I think we’re seeing the logic of him stepping back in the CEO role, because if anybody could empower the company to move in a new direction, it’s the guy who founded it,” Mr. Hanna said.

“We’ve been telling Dell for years that they need to explore a retail strategy,” said analyst J.P. Gownder at Forrester Research. “They need to learn about how retail exposes your product to a wide variety of consumers.”

There is a small risk, Mr. Gownder said, that Dell’s brand, not just its low-end Dimension desktops, could become associated too strongly with Wal-Mart and its price-conscious image.

“Dell has spent the last few years trying not to be the low-price player anymore in the market,” Mr. Gownder said. “They try to be the value provider who customizes the computer the way you want it.”

For Wal-Mart, the move is part of a recent effort to offer more brand names in its electronics departments, and more broadly, a strategy to rekindle sluggish overall sales growth at its stores.

Dell’s machines will add to Wal-Mart’s current lineup, which includes computers from HP, Gateway Inc. subsidiary eMachines and Taiwan’s Acer Inc.

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