November 21, 2003 1:17 PM PST

Wal-Mart to write own name on notebooks

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Wal-Mart Stores is developing a plan to launch its own brand of PCs.

The retail giant plans to begin offering notebooks under its own brand name during the first quarter of 2004, according to industry sources quoted in a report the Taiwan Economic News published this week.

A source familiar with the U.S. notebook industry told CNET News.com that Wal-Mart has shown interest in offering a notebook line but has not yet reached a deal with a specific manufacturer.

A Wal-Mart spokeswoman said only that the company is constantly evaluating new product possibilities.

"We're always looking for products that we think our customers will enjoy at Wal-Mart," she said. But "we have no plans for a private-label PC at this time."

If Wal-Mart, which sells PCs from companies such as Hewlett-Packard and eMachines, moves into the notebook market successfully, it could send ripples across the PC industry. The retailer's typically aggressive pricing could compel manufacturers such as Dell, HP and Toshiba to reduce their notebook prices in response, analysts said.

However, retailers haven't had much luck with house brands in the past. CompUSA has tried a number of times to launch its own PC line but has usually wound down projects after a few months, and Best Buy put an end to its own PC effort.

Some analysts suggested that Wal-Mart is aiming to increase its own profit margin by taking out the intermediary between the retailer and the manufacturer. The company may also be trying to spark consumer demand for notebooks by pushing down prices, they said.

"This move will further drive down notebook PC prices, particularly at the low end," Matt Sargent, an analyst with ARS, wrote in a report.

Wal-Mart notebooks would likely use either an AMD Athlon XP or Intel Celeron processor and come with a 15-inch screen, with prices starting at about $750, Sargent said in the report.

If the retailer, which now offers several brands of notebooks starting at $799 on its Web site, offers its own machines, it's unclear whether it would sell them through stores or only through the Web.

"For the same reason Dell and Gateway can get TVs, there's no reason Wal-Mart can't get computers," Baker said.

Wal-Mart may not continue its own-brand PC push if its first batch or two of notebooks are not seen as successful, according to the Taiwan Economic News report. Selling notebooks in stores would be a departure for the retailer, which mainly carries low-price desktops in its outlets.

Although the retailer, based in Bentonville, Ark., sells a number of notebooks via the Web, it has offered only one portable--an HP model, part of a back-to-school bundle--in stores, according to Steve Baker, an analyst with NPD Group.

Wal-Mart may be eyeing the large increases in retail sales that notebooks have seen at over the past few years. Retail unit sales jumped 31 percent in the United States during the first nine months of 2003, compared with the same period a year ago, according to a report the NPD Group recently released. During the same time period, desktop PC sales decreased by 1 percent.

Still, for Wal-Mart, success in notebooks will likely be measured in quick sales.

"Wal-Mart has to move lots of products and can't be messing around, putting a display model in all 2,800 stores. The (notebook) product has to be able to sell itself right out of the box," Baker said.

 

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