Dell Unveils New Line of Low-Cost Computers : Technology: The rollout answers competitor Compaq, which introduced its own inexpensive line recently.
Continuing an industry price war that seems likely to rage through the fall, Dell Computer Corp. on Friday cut prices and unveiled a new series of low-cost PCs designed to strike back against archrival Compaq Computer.
The Dell announcement came two weeks after Compaq abandoned its position as a purveyor of premium-priced computers and introduced cut-rate systems designed to regain sales lost to Dell, AST Research, Compuadd and other vendors of low-cost, IBM-compatible machines.
Dell’s new line, called Dimension, is priced 5% to 15% less than comparable machines from Houston-based Compaq. Although Dell still has a price edge over Compaq, the gap between their prices has narrowed considerably.
Aware of that, Austin, Tex.-based Dell has also stepped up efforts to portray itself as a full-service vendor of quality PCs by introducing a new series of support programs for customers.
“We never thought our competitive advantage was just price,” said founder and Chairman Michael Dell. The company’s now-famous direct mail sales program, which cuts out the computer retailer, will allow it to offer low prices and on-site and telephone service guarantees, Dell said.
But Dell Computer and other PC vendors will have to remain nimble if they’re to sustain revenue growth and profits in a business that seems to grow more cutthroat every day. The high prices charged by Compaq and International Business Machines have long formed an “umbrella” for the rest of the industry, but that protection is rapidly disappearing.
This fall, it’s likely to vanish altogether when IBM launches a series of low-end products. In Europe, the world’s largest computer company has already begun selling a new cut-rate PC called Amber, and it is expected to roll out a similar strategy for the U.S. market in September as part of a product blitz that will include dozens of new machines.
Just as the Compaq announcement spurred price cuts from a host of vendors, IBM’s September announcement will likely alter the environment once again. Industry executives expect the frantic price-chopping to continue through the fall, possibly forcing weaker players out of the overcrowded market.
But the new structure of the personal computer business is already coming into focus. Larger manufacturers such as IBM, Compaq, Dell and AST will have multiple brands that overlap one another in many respects but are targeted at different segments of the market.
The low-end products, such as Compaq’s Prolinea line, Dell’s new Dimension line and IBM’s Amber, will feature powerful 386 and 486 chips, but they will contain relatively cheap disk drives, power supplies and other components. They’ll also have fewer expansion and upgrade options and limited service and support, and will generally be sold via mass-market retailers and mail order.
Mid-range products, such as Compaq’s Deskpro/i and Dell’s main brand line, will be targeted at business customers looking for reliability and flexibility. The systems will thus come with better components, better service and a range of options for upgrading to high-powered chips and attaching accessories.
Premium-priced machines will not only come with the fastest chips and lots of memory, but will also feature better graphics and networking and video capabilities.
The new Dell products come in numerous configurations. The basic model in the Dimension line, with a suggested list price of $1,259, has a 386sx microprocessor, 2 megabytes of memory, an 80-megabyte hard disk drive, a mouse, color monitor and Microsoft’s Windows software. A comparably equipped Prolinea from Compaq would have a suggested price of $1,474, according to Dell. But the Prolinea’s actual price will likely be lower.
