Dell Launches Cheapo Computer for Chinese Market

Dell Inc. (DELL), the world's second-largest personal computer maker, on Wednesday unveiled a low-cost PC targeting consumers in China to grab market share from dominant player Lenovo Group Ltd.

The desktop computer launch — which targets first-time buyers in the world's second-largest PC market — comes as Dell struggles to sustain growth as its strongest markets mature.

The PC is priced from 2,599 yuan to 3,999 yuan (about $335 to $520), Dell said.

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Chief Executive Michael Dell, who was speaking on the latest leg of an Asian tour, said the company would be interested in rolling out similar models in other emerging markets, such as India and Brazil.

"We're certainly going to look at other markets where it makes sense to bring our other products," Dell told reporters.

China's economy, the world's fourth biggest, grew 10.7 percent in 2006, the fastest rate in more than a decade. Increasing wealth is making electronic goods, like computers, more affordable to a larger section of the population.

Dell is also looking to make acquisitions to bolster its $6 billion services unit, which provides customer support and technical solutions, Dell said.

"[An] option for us is definitely acquisitions," he said without elaborating.

Dell is known for a direct sales business model that cuts out middlemen and allows the company to deal directly with consumer and business customers. But the firm's way of doing business had been criticized in China and other parts of Asia.

The desktop launch in China comes as Dell zeroes in on consumers who traditionally prefer to see before they buy, analysts said.

"Consumers are accustomed to buying things with cash, touching and feeling a product in a store and getting instant gratification, rather than calling into a call center or placing an order online and waiting a few days for the machine to arrive," said Bryan Ma, research director at research firm IDC.

However, the direct-selling model remained a success with commercial buyers, he added.

In China — where Dell ranks third, behind homegrown powerhouse Lenovo Group Ltd. and Founder Technology — the usual price of a personal computer is roughly 5,000 yuan.

But Dell might find it hard going up against the likes of Lenovo, which controls a third or more of a consumer-heavy market.

Over a third of PC sales in China went to consumers last year, while only 9 percent of Dell's shipments went to consumers — lower than for most of its rivals, Ma added.


This month, the U.S. giant reported a sharp drop in quarterly profit while revenue fell short of Wall Street expectations, adding that it foresaw pressure on growth and profit margins in the next several quarters as it spends to revamp its business.

The company had lost market share to global industry leader Hewlett-Packard Co. (HPQ) during the fourth quarter and in January.

As mature markets become saturated and more competitive, computer makers are taking their cue from cellphone makers, which have found ways to make phones for as little as $40 each to target emerging markets such as China, South America and Africa.

Taiwan's Quanta Computer Inc., which makes personal computers for Dell, Hewlett-Packard and Apple Computer Inc. (AAPL) among others, is preparing to sell low-cost computers to the governments of Brazil, Argentina, Libya, Nigeria and Thailand.

Leading chip maker Intel Corp. (INTC) has said it would co-operate with firms such as Quanta's crosstown rival Compal Electronics Inc. to develop $399, $499 laptops that could be unveiled next year.

Dell has manufacturing sites in China and Malaysia in a region where demand for computer hardware is soaring due to relatively low penetration rates compared with Western markets.

But its manufacturing facilities in China are mostly assembly plants, from where the company ships directly to customers.

It also said on Wednesday it plans to make acquisitions to help it to expand its sales services business, which has annual sales of about $6 billion.

York Li, Dell's top manufacturing executive for China, told Reuters last month that the company expected production in China for domestic sales to keep growing at about 30 percent in the short term, meaning the PC giant might add another factory in the country in three to four years.