March 17, 2005 4:00 AM PST

Dell packs up white-box program

Dell has closed the lid on its white-box PC.

The Round Rock, Texas, PC maker has discontinued its program to sell unbranded desktops--an effort it launched in August 2002 to compete with smaller PC assemblers.

The company determined that customers were more interested in Dell-branded hardware, a spokesperson said, signaling the confidence the PC market leader has in its brand name and the PCs that carry it.

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What's new:
Dell is axing the white-box program it started in August 2002 to compete with smaller PC sellers.

Bottom line:
Despite Dell's decision to mothball the white-box program, PCs remain at the center of the company's strategy. The company, analysts say, has realized it can explore different sales channels without having to stray from its name brand.

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"We end-of-lifed the white-box line earlier this year based on customer preference for Dell-branded products," Dell's Roe Thiessen wrote in an e-mail. "We are still offering the full line of Dell-branded and third-party products to solution providers that add value to our customers."

Dell, which continuously experiments with new ways to market its PCs, has seen a number of forays into new PC-related products, such as printers, bring favorable results of late. According to figures from Technology Business Research, Dell's printer sales went from zero in March 2003 to $1.3 billion, or 2.6 percent of the $49.2 billion revenue total for its fiscal 2005, which ended in January.

But the company has always been quick to shutter efforts that didn't meet expectations. It discontinued the slow-selling WebPC in 2000 and axed its Internet music player in 2001. It also put its low-price, fixed-configuration SmartStep desktop and notebooks for consumers on indefinite hold, saying customers were more interested in configuring their own standard Dell systems.

Thus, the white-box program--which some participating dealers said had gotten off to a slow start during 2003--likely ran its course, analysts said.

"I think the company has realized that it can explore different sales channels without having to stray from its name brand," said Brooks Gray, an analyst at Technology Business Research. "The Dell brand is so strong in the United States and Dell's market penetration is at such a high level that the real value for a white-box endeavor for growth potential may have been overseas."

PCs still at the wheel
Despite Dell's decision to mothball the white-box program, PCs remain at the center of the company's strategy. Although Dell has recently entered a number of new markets, including printers and consumer electronics, analysts still expect PCs to be the main engine that drives the company toward its goal of $80 billion in annual revenue. Technology Business Research, for one, believes Dell will get there during 2009, which is Dell's company fiscal year 2010.

"PCs were the main driver of the $23 billion (annual revenue) increase we've seen over the last four years and they will be the main driver of the $25 billion we will expect to see over the next five years," Gray said.

Dell executives are planning to discuss the $80 billion goal--which was first put forth during Dell's fourth-quarter earnings conference call in February--in more detail at its analyst meeting, scheduled for early April. At that event, they're likely to acknowledge successes in printers and consumer electronics, but are also likely to point out that Dell places most of its emphasis on business-oriented offerings such as servers, storage systems and professional services, and will look more to those product lines as well as PCs for growth. PCs, which now account for more than 60 percent of Dell's revenue, according to Technology Business Research, are likely to continue to make up the bulk of Dell's revenue growth, Gray said.

"It's almost surprising to see how much of the growth relies on the core PC products," Gray said.

In its current fiscal year, Dell is expected to tote up $55 billion in revenue. Still, it will have to add about $25 billion more to its annual revenue in order to hit the $80 billion mark.

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2 comments

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Dumb to Pay for Logo
Shouldn't this article actually be titled, "Corporate Customers Willing to Pay an Extra $100 dollars per PC for Dell logo and 11 other stickers conveniently placed on the trackpad or other ill-suited location?"
Posted by jbelkin (167 comments )
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The real reason is Dell's predatory practices
The program has ended because dell has consistanly usurped the channel. They will allow us the small sales, but when the numbers to a single buyer are large, somehow (wink - wink) the deal ends up direct.
Posted by DosHog (8 comments )
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