Dell To Enter White-Box Market

Dell Computer

Plans call for Dell to target the SMB market with $499 PCs, according to the Austin-based direct computer seller. No further details were available at press time.

Solution providers questioned Dell's potential for success in the white-box arena but said the vendor's move bolsters the value proposition of white-box systems.

"They are putting credence into the white box, which is fantastic for guys like us," said Warren Finkel, president of RLM Group, an East Brunswick, N.J.-based systems builder and Intel-authorized distributor for other white-box makers.

Still, Dell's attempt to ship white-box PCs will be a tough sell, given the vendor's antichannel rhetoric and strategy, Finkel added. "No white-box dealer will ever buy a Dell machine," he said.

Other solution providers also said Dell's white-box strategy raises many questions.

"As far as I see it, this may increase their consumer revenues but will have no effect on their enterprise business," said Mark Romanowski, senior vice president of client services and business development at AMC, a New York-based solution provider. "I don't think it's going to affect our business at all. Five-hundred-dollar PCs are best-suited for [small office/home office users, and this is not our business today."

RLM Group recently created a services subsidiary and about two months ago formed a partnership with Dell, said Finkel. The systems builder already is able to obtain PCs from Dell below its online list price, suggesting that the vendor aims to grab business regardless of cost, he said.

"We were buying HP printers from them cheaper than from Tech Data," before HP severed its relationship with Dell several weeks ago, Finkel said. "They are after every market."

Larry Souza, president of Maximum Micro, a South Yarmouth, Mass.-based white-box maker, said he's skeptical that Dell could provide a compelling business model for solution providers. "I don't see the allure to it. We sell a different type of box," he said.

Whereas Dell offers a standard mix of components in its systems, Maximum Micro chooses the best components to provide businesses and individuals with a customized system, Souza said. "Dell is limited in the components that it uses. We don't use that any components that are questionable," he said.

Dell reportedly plans to offer 2 percent to 3 percent margins on its white boxes. Souza said he garners 6 percent to 15 percent margins on his white-box systems.

Another question for Dell is what kind of warranty and service levels it can offer, Souza said. If Dell turns to systems builders such as Maximum Micro for service, the vendor will have to pay $60 to $80 per hour, he said, adding that service calls often include travel and expenses.

However, the key element in the appeal of white boxes is the service that system builders like Maximum Micro provide to clients, Souza said. "You can't beat the local contact. The only way Dell can match that is by partnering," he said. "If we knew we were going to get a certain amount of business for taking a lower service fee, it might work."

STEVEN BURKE contributed to this story.