Dell aims high with new XPS PCs, services

Compant targets well-to-do technology users who are starting to equip their homes

Dell introduced several new high-end PCs Wednesday that it plans to market as premium products that come with a higher level of customer service, company executives said at a New York press conference.

The new PCs represent an expansion of Dell's XPS brand, which was previously targeted mostly at gamers. Dell now wants to go after well-to-do technology users that are starting to equip their homes with wireless networks, multiple PCs, and flat-screen televisions but don't necessarily have the technology expertise required to manage such a setup, said Mike George, vice president of Dell's U.S. consumer business.

Dell has a problem that most other PC companies would love. As the worldwide PC market share leader, the Round Rock, Texas, company must find new sources of growth beyond its traditional business and consumer PC customers. With PC shipment growth expected to slow in coming years, Dell can't rely solely on its current PC customer base to meet the aggressive growth targets set by Chief Executive Officer Kevin Rollins.

The basic idea is to create a brand that appeals to rich people. Dell's public image in the U.S. has long been associated with low-cost PCs, even though the company doesn't always offer the lowest prices for a given class of PCs. The new model is similar to Toyota Motor Corp.'s creation of the Lexus luxury automobile brand, a Dell spokesman said earlier this year when the company first floated the idea.

The high-end of the PC market is fragmented, with companies like Alienware Corp. and Polywell Computers Inc. having carved out a niche for themselves with powerful systems inside eye-catching designs. These systems, with high-end components from Intel Corp. and Nvidia Corp., are much more profitable than the cheap PCs that got Dell into trouble last quarter. The company missed its second-quarter revenue target after it failed to convince its customers to upgrade cheap PCs in favor of more powerful and more expensive models.

As part of its pitch, Dell will offer new services along with its three new XPS desktops and its new XPS notebook, George said. Customers who purchase XPS systems over the phone will have an XPS-only customer service representative assigned to them when they first call for help with their new PC. That customer service representative will maintain a relationship with the customer over the life of their product, he said.

Web customers will be able to access specialized support pages with information about their products as well as a chat room with Dell support personnel dedicated to XPS customers.

Should Dell succeed in drawing customers to its high-end products through these services, it could provide a significant boost to the company's bottom line, said Richard Doherty, principal analyst with The Envisioneering Group in Seaford, New York.

"That has the potential to be a high profit center for them, and it will be a very welcome service," Doherty said. PC retailers like Best Buy Co. Inc. have had some initial success with services such as "Geek Squad," a roving band of PC support technicians that make house calls, he said.

All of the new XPS PCs come with Microsoft Corp.'s Windows XP Media Center Edition 2005. The XPS 400 is the entry-level machine for Dell's luxury PC customer, starting at US$1,099. The XPS 200 costs slightly more, with a starting price of $1,149, but it is available in a slim package that measures about 12 inches high (30.5 cm) and four inches wide.

The flagship XPS desktop is the XPS 600, which starts at $1,849, according to information on Dell's Web site. Its base configuration includes a single-core Pentium 4 630, 1G-byte of RAM, 160G-byte hard drive, DVD-ROM/CD-RW drive, 17-inch flat panel LCD (liquid crystal display) monitor, and Nvidia's GeForce 6800 with 256M bytes of memory. Users can add another Nvidia graphic card, two more hard drives, as well as other high-end components.

The XPS M170 notebook starts at $2,699 with a 17-inch screen, Pentium M 760, 1G byte of RAM, 80G-byte hard drive, DVD-ROM/CD-RW drive, and Intel's 802.11b/g wireless chip.

Dell also introduced two new digital televisions, a 50-inch plasma screen and a 32-inch LCD (liquid crystal display) screen. Both have built-in HDTV (high-definition television) tuners. The 50-inch TV costs $3,799 and the 32-inch LCD costs $1,799.

(Stacy Cowley in New York contributed to this report.)

Dell to launch high-end PC line, Jun. 3, 2005
Dell misses Q2 revenue guidance on lower prices, Aug. 11, 2005

Copyright © 2005 IDG Communications, Inc.