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By John G. Spooner, 21 August 2002 10:00

NEWS Dell is set to begin offering an unbranded, low-priced desktop PC to distributors that cater to small businesses. The company, famed for its direct sales model, is embarking on the new plan as a way to enter the "white box" market, which it estimates to be worth $3bn annually. White-box PC sales have grown quietly over the last five years to represent roughly 30 per cent of the market, according to a recent report from market researcher IDC. These PCs are assembled or purchased and resold by small outfits that range in size from single-owner or family-owned shops to larger, regional PC sellers. By offering the PCs to distributors, Dell essentially joins the party, allowing the companies to sell and service Dell's $499 unbranded computer as they would if they had made it themselves. Meanwhile, Dell can offer the dealers discounts, favourable leasing terms and other sales incentives. The new desktop, dubbed White Box D510, will be available from Friday and will offer an Intel Celeron processor and a one-year warranty. Buyers will be able to configure it to their desired specifications. Even though any given white-box maker is tiny compared with Dell's 30,000-plus employees, the collective market represents an untapped portion of worldwide PC shipments. As Dell tries to gain market share worldwide, white-box makers are in many respects one of the company's biggest competitors in the consolidated PC industry. Analysts said Dell's move could help it gain market share, if enough resellers sign on to offer the new PC. "Dell's still very reliant on box sales," said Toni Duboise, desktop analyst with ARS. "So it makes sense that it would penetrate every single outlet for box sales." However, it's largely up to the dealer community to determine how well the new PC will be received. Two things may hold Dell back. First, $499 for a desktop PC without a monitor is a low price, but not dramatically so. Some competitors are likely to beat it. Second, Dell could risk cannibalising at least some returns from its efforts to sell directly to small businesses, Duboise said. Rivals reacted to the Dell news with scepticism. In a statement, Hewlett-Packard said that Dell's move will not change the competitive landscape. "HP has a long-term commitment and long-standing history with the channel. We have deep partnerships, an extensive service provider network, and proven support and certification processes," the company said. "You can't just throw boxes into the channel." Though Dell expects that it will be able to expand its reach with the new desktop, it is making the move with some initial caution. "We're going to wait and see how this goes. The only plan at this point in time is to offer the desktop product," said Amy King, a Dell spokeswoman. "We will evaluate the market and see what demand is like and take it from there." The move isn't really a major departure for Dell, which has experience working with dealers. Dell sold PCs through dealers, including retail outlets, in the early 1990s before making a total switch to selling directly to customers. John G Spooner writes for News.com