SAN FRANCISCO – Dell Inc. (DELL) on Thursday said it will cut back on mail-in rebates and simplify its pricing on computers after customers complained the process for getting the sale price was too complex.
Analysts said the move would help Dell improve customer relations, but would not significantly boost sales as the world's biggest personal computer maker said the prices that customers ultimately pay for its products remain the same.
Revenue growth at Dell, which sells directly to customers via the Internet and phone, has slowed in recent quarters amid tougher competition from No. 2 PC maker Hewlett-Packard Co. (HPQ) and complaints about poor after-sale services.
Some analysts question whether Dell can regain its high double-digit percentage growth of the early years of the decade.
"Dell is facing a lot of challenges," said Shannon Cross, an analyst with Cross Research. "HP is just reinvigorated, which is one of their biggest problems. Their competitor is back."
Dell shares ended down 68 cents, or 3 percent, at $21.70, more than the Merrill Lynch Tech 100 index's 1.6 percent fall.
Dell said it expected to reduce the number of promotions for U.S. consumers and small businesses by about 70 percent per product line.
Promotions tied to a single product would fall by 80 percent, it said.
The reductions will be implemented over 12 to 18-months, beginning in August with the Inspiron notebook computers and Dell televisions.
"People hate rebates," said Cindy Shaw, an analyst at Moors & Cabot Capital Markets who has a "sell" rating on Dell stock. "This is a good move for Dell."
Some analysts had expected Dell to announce some price cuts to compete with rivals such as Hewlett-Packard and Acer Inc., which are eroding Dell's traditional price advantage thanks to cheaper components and more efficient manufacturing.
Dell in May announced plans to cut prices and is spending $100 million to improve customer service, hiring more than 2,000 sales and support staff.
Ro Parra, senior vice president of Dell's home and small business group, said the promotions cutbacks will not change the "net price" that customers pay but will make the buying process simpler.
"What we've heard from customers is they don't like them," Parra said on a conference call with reporters, referring to mail-in rebates. "They are problematic, and our intent is to reduce them over time."
Dell of Round Rock, Texas, joins consumer electronics retailers including Best Buy Co. (BBY) in reducing mail-in rebates, which often require customers to fill out multiple forms, send product codes from packaging, and wait for months before receiving checks.
Dell said it will concentrate on paperless rebates for its remaining promotions, leading one analyst to question whether that meant more consumers would take advantage of the offers.
"My biggest question is, what's the financial impact of this? If you don't get a lot of hits on mail-in rebates, and now you're just going to go to instant rebates or price cuts, then that hits everyone," Cross said.
Parra said about 80 percent of Dell's customers redeem the rebates at present.