Dell Joins Internet Fray

By announcing this week that it would be packaging one-year free Internet service with its PCs, Dell joined the crowd of companies fighting to capture new computer buyers. But the Round Rock, Texas giant hardware maker also showed that it too must begin focusing on e-commerce — if it hopes to survive.

The new Dell computer priced at $959.00 (US$), will now come with a year’s Internet access from its own Dellnet Internet service. However, unlike other “free PC” deals currently being touted by companies such as America Online, Dell’s deal doesn’t exclude monitors or ask for a 3-year Internet contract.

Margins Dwindle

Analysts say that PC makers like Dell — which have traditionally focused on business or high-end computer buyers — are being forced to find a way to compete with the many giveaway programs that have been killing the already slim margins on computers.

Dell’s move comes after years of ignoring the low-end PC market and shows that it too is switching gears — like other hardware makers — to depend on making more of its future profits via e-commerce.

Repeat E-commerce Customers

With each PC it sells, Dell is looking to create repeat customers by offering a wide range of after-market products through its Gigabuys online store. In addition, the company has entered partnerships with several Internet service suppliers, including San Diego-based (At) Backup Inc., which will be offering Dellnet users 20 million bytes of computer storage online with security protection. As part of the package, Dell is also throwing in a simple-to-use method for publishing personal Web home pages from Homestead Technologies and a digital picture-sharing service via the Internet through Eastman Kodak Co.

If that isn’t enough, also included in this bag of virtual goodies, is a software package from MusicMatch Inc., which helps users transfer their personal music CDs onto harddisks for playback like a jukebox.

New Portal

Dell’s new e-commerce strategy became even more obvious when it also announced this week that it was launching its own portal with the help of Snap.com, NBC and CNET. The new customized portal will be the default home page for all users of Dellnet.

This dramatic shift toward e-commerce comes after its last quarter when Dell failed to snatch the No. 1 spot among PC makers in the United States from Compaq Computer Corp.

But some industry experts say Dell’s sudden metamorphous is much more than just an attempt to cash in on e-commerce. They say it’s simply a necessary and overdue first step in reinventing itself in a marketplace no longer driven by hardware.

What do you think? Let’s talk about it.