Dell offers free laptops with broadband subscription

Dell has signed a deal with a U.K. mobile phone retailer to distribute free laptops with the purchase of a broadband Internet access subscription, continuing the company's push into the retail market.

Starting in September, consumers who buy a two-year contract for America Online's broadband service through the Carphone Warehouse Group will get a coupon for a free base-model Inspiron notebook from Dell. AOL broadband costs £19.99 ($41) per month.

A similar free laptop offering was unveiled this week by mobile provider Orange UK, a move designed to get consumers who may have never owned a computer or bought broadband service using the Internet in order to grow subscriber numbers, said Jonathan Coham, an analyst at Ovum. Those customers tend to be older and are more loyal.

But it won't come cheap for those operators. "These are very low-margin customers for the time being," Coham said. "Both Orange and Carphone Warehouse are going to make a slim amount of money on top of what they are getting from the broadband subscriber."

The Dell laptop comes with Microsoft's Vista Home Basic OS, 1 GB of RAM, an 80GB hard drive, an Intel Celeron processor and Wi-Fi. The laptop can be upgraded for a fee. Customers also get a wireless router, but have to pay a £14.99 laptop delivery fee.

By contrast, Orange's free laptop offers fewer features than Dell's. It's made by Ei Systems, and comes with Windows XP Home, 256 MB of RAM and a 40GB hard drive but doesn't have Wi-Fi. Users can upgrade to a better laptop for a fee. Orange's broadband service, however, is cheaper, at £14.99 per month for a 24-month contract, excluding an initial discount for the first three months.

A Dell spokeswoman said the deal with Carphone Warehouse is an extension of the company's retail strategy, and there will be more retail deals around the world coming soon.

Dell, which traditionally sold computers online, by phone or through catalogs, sees the retail market as a way to stop its declining market share, Coham said. Dell could potentially try to entice the novice computer users who take the free laptop into buying technical support packages.

"I think if Dell is smart they will see this as an opportunity to upsell these basic PC customers with additional accessories, software and support," Coham said.

Dell began selling computers at Wal-Mart, the American retailer, in June. The company is also now selling three PCs with the Ubuntu 7.04 Linux OS installed, a move driven by customer demand, Dell has said.