Dell Computer Corp., reversing its long-held strategy of dealing directly with customers, is now offering unbranded, low-cost PCs to U.S. white-box makers.
Dell Computer Corp., reversing its long-held strategy of dealing directly with customers, is now offering unbranded, low-cost PCs to U.S. white-box makers, essentially smaller vendors that can relabel the PCs as their own brand.
Dell, which has long spurned the idea of selling its products through third parties, said last week it hopes to garner about $380 million in sales over the next 12 months by tapping a U.S. commercial white-box market that accounts for about $3 billion in annual revenue.
"This is a small-business initiative," said Amy King, a Dell spokeswoman at the companys headquarters in Round Rock, Texas. "In studying the market, we noticed that about 40 percent of the desktops in the small-business space are from white-box vendors, so were looking at this as an opportunity to penetrate that space."
Starting late last week, Dell began offering an unbranded PC, the White Box 510D, to small computer vendors and resellers, starting at $499 for a system configured with a Celeron 1.7GHz processor from Intel Corp. The low-cost, configurable systems are available only to registered PC vendors and resellers approved by Dell.
While the computer maker hopes to expand business, others contend the deal could backfire by enabling smaller competitors to lure away current or potential Dell customers. "I think, more than anything else, Dell just did a big favor for the white-box industry by legitimizing that non-name-brand computers are a ... business alternative for customers," said John Sheaffer, chief executive of Sysix Cos., in Westmont, Ill., which resells computing systems from major vendors such as Hewlett-Packard Co., IBM and Sun Microsystems Inc.
"I think there are a lot of major companies interested in using white-box makers, but, for various reasons, chose to stick with Dell, who are now going to reconsider that decision," Sheaffer said.
While not widely known as top-tier PC makers such as Dell, HP and IBM, white-box makers continue to have a relatively strong presence in the highly competitive U.S. market, accounting for slightly less than a third of all PC sales, according to International Data Corp.
"Many companies rely on their white-box vendor for their IT needs, trusting them to select the hardware and software suited for their businesses and then installing and maintaining that equipment," said Loren Loverde, an IDC analyst in Miami. "They provide crucial support for many companies that might otherwise not be able to afford it."