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Dell To Sell Unbranded PCs

Access to the $3 billion white-box market is part of Dell's larger goal of increasing revenue.
In its quest to find new avenues for expanding its PC business, Dell Computer on Friday will begin selling unbranded desktops through U.S. dealers. Dell will manufacture the 510D PC with a choice of Intel Celeron or Pentium 4 processor that the company will sell to computer dealers. These third parties can then re-brand the PCs and package them with installation and support services.

Dell has never fully embraced a reseller model for its products, but it's taking a small step toward channel sales with this new program. The company says it has no immediate plans to extend this reseller model to any other product lines. The unbranded, or white-box PCs, which will be built at Dell's Austin, Texas, facilities, will be priced from $499 with an Intel Celeron processor. A Pentium 4-based processor will be available at a higher price. Channel partners will be offered financial incentives to sell Dell equipment, including 2% to 3% discounts, term financing, and leasing. The company says it hasn't yet signed any third-party dealers for this new program.

Access to the $3 billion white-box market is part of Dell's larger goal of increasing revenue. Dell has said it wants 40% share of the PC market and has its sights set on reaching $60 billion in revenue over the next few years. "They've set lofty goals," says Brooks Gray, a senior Technology Business Research analyst. Part of Dell's strategy to accomplish its goal is to use a modified channel strategy to steal share from competitors such as IBM and Hewlett-Packard for low-end, small-business PC sales.

"A move by Dell into the channel will have an absolutely huge impact on IBM and HP," Gray says. "HP and IBM have always gotten burnt on eroding price protection through their channels strategies." The longer a product sits on a reseller's shelf, the less it sells. With Dell's model, it treats the reseller as its customer and continues to operate its supply chain as usual.