Dell to sell PCs at Best Buy

This blog was updated at 10:30 a.m.

Beginning in the next few weeks, Dell notebooks and desktops will be for sale at Best Buy, the companies announced Thursday.

(Credit: Dell)

Several models of XPS and Inspiron PCs will be available at 900 Best Buy locations, including the XPS M1330 in white, the Inspiron 1521 in blue and black, the Inspiron 1420 in black, and the all-in-one XPS One desktop. Other available desktops will be the Inspiron 530, 531, and 531s. More models and colors will be added in the next few months, Dell said.

This is a huge step for the company that strictly sold PCs and peripherals directly to consumers for the first two decades of its existence. Now Dell, which pioneered the model that cut out the PC retailer, will be just one of the other names on the shelf at retail--right next to Apple, Hewlett-Packard, Gateway, Acer, and Toshiba.

Of course, Best Buy is not the first retailer Dell has partnered with, but Best Buy is different than Wal-Mart or Staples. It's the largest consumer electronics retailer in the U.S., and this announcement marks a huge cultural shift at the Round Rock, Texas, PC maker.

"It's a big step for them. It's risky, but it's a gamble they had to make," said Richard Shim, PC market analyst for IDC. Dell has been ceding market share to HP for several quarters. As of the third quarter of this year, Dell shipped 27.8 percent of PCs sold in the U.S. HP is right behind with 24.1 percent of PCs shipped.

Chief executive Michael Dell said last week during the company's earnings call with investors that more retail partners would be announced in some of the largest countries in the world. The Best Buy deal brings the number of retail locations that sell Dell PCs to more than 10,000 worldwide, Dell said.

All of those retailers have been added in the last six months, since the company first announced it would establish a retail presence, beginning with Wal-Mart and Sam's Club in May. Since then, it has added Carphone Warehouse in the U.K., Bic Camera in Japan, Gome in China, and Staples.

"It's going to be hard for them to make this change," said Shim. "(Dell is) used to having a very intimate relationship with customers." Part of that relationship is upselling customers on additional Dell items. "Now it's no longer Dell saying, 'Hey, buy our printer.' Now it's a retail sales guy saying that if you buy a Dell system you can buy any one of these (other) printers."

[skillingssucks]

Best Buy Not The Largest

"Of course, Best Buy is not the first retailer Dell has partnered with, but Best Buy is different than Wal-Mart or Staples. It's the largest retailer in the U.S., and this announcement marks a huge cultural shift at the Round Rock, Texas, PC maker."

Best Buy may be the largest ELECTRONICS retailer in the U.S., however, Wal-Mart is not only the largest retailer in the U.S., it's the largest in the world.

[ericaatnews]

You're right...

Thanks for catching that!

[ladiesmanwc]

what about Dell Direct Store....

So this is a death knell for the Dell Direct Stores? Now that customers can just go and pick up a Dell wherever they'd like, how does Dell plan to keep the Direct Stores operational?

[kirktastic]

Second time at Best Buy

Actually, Dell sold PCs at Best Buy in the early 90s. Let's hope it is a little more successful at it this time.

[Llib Setag]

Michael Dell gets "schooled"

Remember when Michael Dell wrote his senior thesis on the automated direct to consumer business model for PCs thereby cutting out the "middle man extra costs of the retailers...?"

TODAY Dell has learned their lesson & started selling Dell POC boxes at Big BOX Retailers to catch up to all the others they are lagging behind in PC sales ( not servers & IT contracts ).

HP spanked Dell & Apple is now worth more than Dell is...WOW! good job Michael.
Time to go back to school, boy.

Don't believe me?
BUSINESS WEEK ARTICLE :

News Analysis November 30, 2007, 12:01AM EST text size: TT

Dell: Confounded by Costs

Restructuring expenses will take further toll on the computer maker's earnings, likely weighing on shares and delaying its turnaround
by Louise Lee

Disappointment with Dell (DELL) isn't over yet. The world's second-largest computer manufacturer posted fiscal third-quarter sales results that exceeded Wall Street expectations, but its profit performance and outlook for coming quarters left investors dismayed. Shares tumbled about 10%, to $25.25, in extended trading on Nov. 29, after the results were released, and continued the slide the following day. By late afternoon, Dell stock had lost more than 13% from the previous close.

Back under the watch of founder Michael Dell, who returned as chief executive early this year, the company unnerved shareholders with news it will "continue to incur costs as it restructures" and "these actions may adversely impact the company's performance." Dell's expenses are "still considerably higher than we want," Chief Financial Officer Don Carty said during the company's first conference call with analysts in a year.

The results suggest a long-running turnaround attempt at the Round Rock (Tex.) company may be proceeding more slowly than Wall Street anticipated. The company is struggling to emerge from almost two years of slowing growth and slipping market share. Dell's results contrast sharply with those of key competitor Hewlett-Packard (HPQ), which reported robust quarterly results and issued a rosy forecast on Nov. 19 (BusinessWeek.com, 11/20/07).

Key Expense Measures Rise
In the quarter ended Nov. 2, Dell recorded sales of $15.65 billion, exceeding Wall Street's estimate by about $300 million and representing a healthy 9% increase from a year earlier. Net income jumped 27%, to $766 million.

But expenses as a percentage of revenue, a key measure of how well the company is managing costs, rose noticeably. Selling, general, and administrative expenses rose to 12.2% of revenue from 10.6% a year ago. Total operating expenses rose to 13.2% of revenue, up from 11.5% a year ago. "People are disappointed that the revenue increase did not flow through to the bottom line," says Brent Bracelin, analyst at Pacific Crest Securities. "It doesn't look like the company has trimmed enough fat." Dell's operating income of $829 million was 5.3% of revenue, well below the 8% level that Dell posted in years past.

Earlier this year, Dell said it wants to reduce its workforce by about 10%, but as of Nov. 2, Dell had cut only about 2.5% of the 84,000 employees it had on Aug. 3. Carty insisted, though, that the company "is still driving to that [10% reduction] number." Carty added: "We've identified a considerable amount of low-value work." The company also is working to automate certain tasks to help it eliminate more employees. "We have more manual work going on than we need," he said. At the same time, he said that other initiatives, such as acquisitions or "new strategies," may mean keeping or hiring certain kinds of employees.

Gross margin performance, too, didn't meet some analysts' expectations. Gross margin inched up to 18.5% of revenue, from 16.6% a year ago, but still fell below the 19% analysts were projecting. The company blamed component costs, saying they didn't decline as steeply as the company was projecting. Shaw Wu, analyst at American Technology Research, questions why that's the case, when some of Dell's main competitors, including HP and Apple (AAPL) have recently enjoyed the benefits of low component costs.

Investors Doubt "Ultimate Litmus Test"
Dell has been struggling with falling market share and profitability problems since 2005. Former CEO Kevin Rollins and other top executives, including many veterans, left this year, and Dell was forced to restate four years of results following a lengthy internal accounting investigation. Over the last six months, the company has hired a raft of outside executives and has begun making acquisitions, a strategy it almost never used in the past. It also has changed its sales model and over the summer began selling PCs in retail outlets around the world, including Wal-Mart Stores (WMT) in the U.S. and Gome in China. That move has helped to slow the decline in Dell's consumer business. In the most recent quarter, revenue for its U.S. consumer business fell 6%, a smaller decline than in recent quarters.

Despite the problems with its expenses, Dell reported some brighter news: It said revenue growth in overseas markets was robust. Combined sales in Brazil, China, Russia, and India, four crucial markets, were 32% of overall revenue. In all, overseas sales accounted for 46% of revenue, up from 44% a year earlier. Dell generated $1 billion in cash for the quarter, which Carty called "the ultimate litmus test" of Dell's performance.

But judging by shareholder reaction following Dell's announcement, investors clearly are using other standards.

Lee is a correspondent in BusinessWeek's Silicon Valley bureau

[Llib Setag]

Apple kills Dell on Black Friday Sales

MACNN : Apple tops Dell in growth on Black Friday

Apple topped arch-rival Dell in growth on the busiest shopping day of the year -- Black Friday -- with a 111 percent increase in unique visitors over the prior year. That growth compares to a 29 percent increase for Dell, which brought the company 978,000 unique visitors on Black Friday and 1.26 million visitors on Cyber Monday.

Of the estimated 32.5 million visitors logging onto virtual stores on Cyber Monday, most were purchasing items like Apple's iPod and Nintendo's Wii game console, according to Nielson Online as cited by Fortune. Apple received 643,000 unique visits from home users on Black Friday, followed by 1.35 million unique hits on Cyber Monday.

[innebandy]

Well...

While Apple's percentage growth is impressive it seems intentionally misleading to say that losing to Dell by 335,000 visitors on Black Friday and winning by just under 100,000 on Cyber Monday means that "Apple kills Dell on Black Friday sales." The article doesn't mention sales at all, and Aplle lost on Black Friday in terms of visitors.

[make_or_break]

I visited Apple's website on Black Friday

But it wasn't to [i]buy[/i] anything. It was to TROUBLESHOOT ongoing, seemingly endless glitches with my wife's latest iPod nano and that ever increasingly confounding bloat of a software app, iTunes.

Why she can't stick with her perfectly working 2G nano (like I've done) is beyond me...