Dell to Sell PCs at Wal-Mart

PC maker Dell announced Thursday it will break with its 23-year direct sales strategy and sell its merchandise at Wal-Mart. Starting June 10, Dell will sell two versions of its Dimension multimedia desktop computer for under $700 at about 3,500 Wal-Mart and Sam's Club stores. Dell's shares closed down 1.4% at $25.89, and those of computer component manufacturers declined as well, on worries that the low-cost PCs will shrink profit margins. Dell's entry into retail stores will have an impact on rival Hewlett-Packard, which took the #1 PC company spot from Dell in part on the success of its strategy of selling through major retailers; and on Taiwanese PC manufacturer Acer, which sells its merchandise at Best Buy, Circuit City and Wal-Mart. Last month, CEO Michael Dell tipped off the market that the company was pursuing a retail outlet by telling employees in a memo that the direct-sales model was "not a religion." "Today's announcement with Wal-Mart represents our first step [in global retail]," said company spokesman Bob Pearson. "Stay tuned."

Sources: Reuters, MarketWatch, San Jose Mercury News, ZDNet, Bloomberg
Commentary: Dell's New Model [Forbes] • Dell Tries Its Hand At Mass Distribution • Which Partner Will Help Ease Dell Into Retail?
Stocks/ETFs to watch: Dell Inc. (DELL), Wal-Mart Stores Inc. (WMT). Competitors: Hewlett-Packard Co. (HPQ), International Business Machines Corp. (IBM), Sun Microsystems Inc. (SUNW). ETFs: Internet Architecture HOLDRs (IAH), PowerShares FTSE RAFI Telecom & Tech (PRFQ), Vanguard Information Technology ETF (VGT)
Conference call transcripts: Dell Q2 2007

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