Changing Channels

So the mighty little PC engine that could and then all of sudden couldn't is now looking for new ways to "could" again. And in a short period of time, things might start swinging to the positive again for the PC maker from Austin. Just recently, Dell said it planned to sell consumer notebook PCs at more than 500 of Wal-Mart's Sam's Club outlets. Dell also recently said it will sell desktop computers for less than $700 each in more than 3,000 Wal-Mart stores. (Wow, I just saw a spate of TV and print ads promoting their PCs at Wal-Mart - and they were nicely done, as well).

Will this be enough to take some momentum away from HP, Lenovo and others? Will it help Dell grab a piece of the PC consumer pie? After all, consumer sales account for only 15% of Dell's $57 billion total while servers are a $5 billion business for Dell. Dell, which ironically just told partners it is exiting the TV business and the consumer electronics space, is being de-emphasized. However, the news also means the company, with Michael Dell back in the CEO chair, is showing a more diversified channel sales model, going beyond its traditional build-to-order, direct sales model.

For those unfamiliar with the ways of PC retailing, the addition of a few chains like Wal-Mart and Sam's to your distribution model is the proverbial snake swallowing the elephant. In fact, over the next 12 months the company plans to forge "10 to 20" key agreements with major retailers around the world, Dell said.

However, the adaptation from direct marketer to retail supplier is not easy. The only thing that is easy is getting Wal-Mart and the like to want a household brand that has a huge revenue upside to boost a retailer's sales along with a commitment to help market the product and their store. But that is where the lay-up drill ends.

The move to retail means Dell will need to stock inventory at all the stores and sell that inventory before it gets stale. This puts tremendous pressure on Dell's supply chain managers and technology buyers who have to tap new intuitive and understand what models customers will want and when, while being prepared to slash prices to move products that gather dust on shelves.

To be sure, this will be an interesting six months (through the holiday season). We are eager to see if Dell can master the consumer, like say Apple--and to a lesser extent HP - do in the same way it has attracted tech-oriented PC consumers. But the Wal-Mart shopper is clearly not the same person who is dialing up dell.com or its 800-phone numbers.

The announcement expands Dell's retail push to notebooks, which are typically more expensive and more profitable than low-end desktops. The Inspiron 1501 notebooks will have Turion dual-core processors from Advanced Micro Devices Inc., two gigabytes of memory and 120-gigabyte hard-disk drives, a Dell spokesman said. They will feature the Vista Home Premium operating system, the spokesman said.

2. Infiltrating The $4 Billion Annual GPS Market

According to research by the Consumer Electronics Association, the GPS market is strong and getting stronger and is driven by ease of use and display quality of the devices, which are used primarily for navigation assistance in a vehicle.

"Convergence has spread GPS across multiple product segments resulting in greater consumer awareness and budding adoption of the technology," said Steve Koenig, CEA's senior manager of industry analysis. "The availability of new services like real-time traffic information will continue to drive this segment forward in the coming years."

GPS devices are also providing such things as music player and audio book functionality.

While GPS ownership is still relatively small at 18% of online consumers, CEA market research demonstrates growing consumer interest, with shipment revenues nearly tripling between 2005 and 2006. Nearly one-quarter (24% of online consumers) plan to purchase a GPS device within the next year, spending an average of $410, which could result in sales reaching $4.1 billion in 2007. The study shows that 33% of future GPS buyers are interested in owning a cell phone that has GPS/navigation capabilities, making navigation on-the-go even easier. In addition to in-car navigation, owners of portable or hand-held GPS devices cite other uses for the technology, such as hiking (18%), walking (16 %), boating (14%), biking (7 %), running (6 %) and even flying (4 %).