Dell Unloading Old PCs in Costco Stores

SAN FRANCISCO -- Dell will supplement its famous direct-selling model this holiday season by making some aging desktops and notebooks available through the low-cost retailer Costco, a Dell spokesperson confirmed today.

Dell Dimension 4700 and Dell Inspiron 2200 PCs are available for $899 each at certain Costco stores in the United States, said the company's Mike Maher. Similarly configured systems were more expensive last year.

The Dimension 4700 comes with Intel's Pentium 4 540 processor, which will not support 64-bit operating systems--unlike most of Intel's current Pentium 4 chips and all of Advanced Micro Devices' Athlon 64 chips. The 4700 also carries 512MB of memory and a 160GB hard drive. That configuration is a bit lacking when compared with other systems on retail shelves, said Toni DuBoise, senior analyst at Current Analysis in San Diego, which first spotted the Dell systems on Costco shelves. Similarly, the Inspiron 2200 packs a 15-inch standard-width display, while the notebook market is gravitating toward wide-screen displays, she said.

The two Costco systems do come with longer warranties than other retail systems, however, giving Dell a way to differentiate its products, DuBoise said.

Costco has resold Dell systems on its Web site in the past and has promoted Dell products with in-store displays in Costco stores, Maher said. But now customers can buy Dell PCs right off Costco's store shelves, an expansion of the existing relationship between the two companies, he said.

Dell Sales Model Adapts

Dell's long-time reluctance to use retail channels is changing as the worldwide leader in PC shipments has experienced growing pains during 2005, said DuBoise. Dell has blamed weak performance in the U.S. consumer market for its failure to reach revenue targets during its last two operating periods.

"It's hard to grow when you are the 800-pound gorilla," DuBoise said. Dell's experimentation with retail channels has been on the rise in recent years, as shown by the expansion of mall kiosks and television advertising on home shopping channels like QVC.

But the company also remains loyal to its direct model of selling PCs over the phone and on the Web. It has resisted calls from analysts to enter the retail market in places like China, where direct sales of PCs are a relatively new concept.

"I don't think they are going to go full-blown retail. But I think they can use retail to their advantage to get rid of antiquated components," DuBoise said.