Dell unloading old PCs through retail stores

Dell Inc. is supplementing its famous direct-selling model this holiday season with a select number of aging desktops and notebooks available through the U.S. low-cost retailer Costco Wholesale Corp., a Dell spokesman confirmed Monday.

Dell's Dimension 4700 and Inspiron 2200 are available for US$899 each at certain Costco stores around the U.S., said Mike Maher, a company spokesman. Similarly configured systems were priced lower last year. The two systems are part of a "one-time allotment" of systems to Costco that can be sold through the retailer's Web site or on its store shelves, he said.

Costco has resold Dell systems on its Web site in the past, and has promoted Dell products with in-store displays in Costco stores, Maher said. But now customers can take Dell PCs right off Costco's store shelves and bring them home, an expansion of the existing relationship between the two companies, he said.

Dell's long-time reluctance to use retail channels is changing as the worldwide leader in PC shipments experiences growing pains during 2005, said Toni DuBoise, senior analyst at Current Analysis Inc. in San Diego, which first discovered the Dell systems on Costco shelves. Dell has blamed a weak performance in the U.S. consumer market for its failure to reach revenue targets for its last two operating periods.

"It's hard to grow when you are the 800-pound gorilla," DuBoise said. Dell's experimentation with retail channels has been on the rise in recent years, as shown by the expansion of mall kiosks and television advertising on home shopping channels like QVC.

But the company also remains steadfast to its direct model of selling PCs over the phone and the Web. It has resisted calls from analysts to enter the retail market in places like China, where direct sales of PCs are a relatively new concept.

"I don't think they are going to go full-blown retail. But I think they can use retail to their advantage to get rid of antiquated components," DuBoise said.

The Dimension 4700 comes with Intel Corp.'s Pentium 4 540 processor, which will not support 64-bit operating systems like most of Intel's current Pentium 4 chips and all of Advanced Micro Devices Inc.'s Athlon 64 chips. It also features 512M bytes of memory and a 160G-byte hard drive, a configuration that is a bit lacking when compared alongside other systems on retail shelves, DuBoise said. Likewise, the Inspiron 2200 features a 15-inch standard width display, while most of the notebook market is gravitating toward widescreen displays, she said.

However, the two Costco systems do come with longer warranties than other retail systems, giving Dell a way to differentiate its products, DuBoise said.

The retail allotment to Costco began during Dell's third quarter, which ended earlier this month, Maher said. Most of the systems are probably gone by now, he said.