Dell Delves Into White Box PCs

Dell Computer will make a push into the so-called "white box" market as of August 23, selling unbranded PCs to small computer resellers that serve as outsourced IT departments for small and medium businesses.

The WhiteBox 510D will have a base price of $499, and will be sold exclusively to IT service providers that register with Dell, says Amy King, a Dell spokesperson. The service providers will then resell the PC to their clients at whatever price they choose, she says. Specific criteria for entrance into the program has not been determined yet, she says.

The PCs will be available in a variety of configurations. The base configuration, for $499, comes with a 1.7-GHz Celeron processor from Intel, 128MB of RAM, a 20GB hard drive, a CD-ROM drive, and Windows XP. It does not include a monitor.

Making a Profit?

The margins on this product are comparable to Dell's other desktop systems available through its Web site, King says. Michael Dell, the company's founder, chairman, and chief executive officer, has said he expects the program to account for no more than 1 percent of Dell's revenue over the next four quarters, according to King.

The white box market is extremely fragmented, King says. While some PCs sold by small IT service providers are self-built, 60 percent purchase white box PCs for their clients from other manufacturers. Dell can provide a higher-quality PC at an equivalent cost to these IT service providers, as compared to a PC purchased from a smaller manufacturer, she says.

Dell will offer a 1-year warranty on parts and technical support to the IT service providers in its program.

Brand Name PCs

White box manufacturers generally assemble, sell, and ship PCs without a well-known brand name, usually to small businesses, educational, or government customers served by the small IT service providers Dell is targeting.

Most white box manufacturers focus on a specific region, but together they form the largest block of PC shipment market share, as tracked by IDC. In fact, IDC had to revise its estimates of the worldwide PC market earlier this year because it had undercounted shipments from white-box manufacturers.

Examples of large well-known white-box manufacturers include Brazil's TropCom, and Mexico's Alaska, a subsidiary of distributor Mexmal Mayorista.

Dell's usual build-to-order sales model will stay the same for this program, King said. The company will not manufacture the WhiteBox D510 ahead of orders; service providers will have to order PCs from Dell and be responsible for selling their stock to avoid inventory costs.