Dell dives into flat-panel television market
By Terril Yue Jones
Los Angeles Times
Dude, you're getting a Dell?
Gary Friedman • Los Angeles Times
When Neil Ludvigson figured it was time to trade up from his 6-year-old, 24-inch television, he set his sights on a big-screen, flat-panel, high-definition replacement.
Dell joins other PC manufacturers, including Hewlett-Packard and Gateway, in delving into the television market. The computer giant says its "great economies of scale" made flat-panel TVs a logical choice in expanding its reach in the consumer-electronics industry.
"I always do my homework when I have a fairly major purchase," the 69-year-old retired envelope-production company president said.
So after checking the offerings at major retailers near his home in Henderson, Nev., and scouring newspaper ads for Circuit City and CompUSA, he settled on a $3,000, 42-inch wide-screen, high-definition plasma TV from Dell Inc.
The world's largest personal computer maker is pushing its way into TVs, the latest expansion of Dell into products beyond PCs. Last year, it branched into digital music players, prompting questions about whether the company that shook up the computer industry can do the same in consumer electronics, long dominated by familiar names such as Sony Corp., Philips and Matsushita Electric Industrial Co.'s Panasonic.
To Ludvigson, the answer is as clear as the image on his mammoth new TV.
"It's a wonderful picture," said Ludvigson, who bought the TV online, sight unseen, and set it up in his living room last month.
Dell is not the only PC maker to push TVs in recent months. Hewlett-Packard and Gateway Inc. both offer televisions, part of a wider effort by PC makers to move more aggressively into digital home entertainment.
But it's Dell's ability to decisively alter a market that has analysts and competitors watching its efforts closely. Dell traditionally doesn't enter new markets until it figures it can make big money quickly — even when others can't. Its streamlined production and distribution processes have kept its profit growing even as the margins on PCs from other manufacturers shrink.
In that way, the PC and consumer-electronics industries are a lot alike. Margins on TVs and DVD players are thin, and the competition among manufacturers is intense. Round Rock, Texas-based Dell historically has thrived in that type of environment.
In 1994, for instance, Hewlett-Packard Co. and Compaq Computer Corp., which HP acquired in 2002, claimed 14.8 percent of the world's PC market; Dell only 2.8 percent, according to market researcher IDC. A decade later, HP's share had grown only slightly to 15.8 percent, but Dell's had surged to 17.9 percent — making it the global leader.
Televisions aren't much of a technological leap for Dell. The manufacturer that supplies liquid crystal display panels for Dell PCs also makes the display panels for Dell televisions, so Dell can leverage the same technology and supplier.
"We have great economies of scale we can apply, and flat-panel TVs were an easy thing to go after," said Phil Ventimiglia, Dell's director of product marketing for displays.
Perhaps the biggest challenge for Dell will be persuading people to buy TVs without seeing them first, the way they do Dell computers.
"The problem is that television is a very different experience than PCs," said Van Baker, a consumer technology analyst at market researcher Gartner Inc. "People don't generally go to a store and compare the color of one PC screen against another."
The only place shoppers can actually see a Dell TV is in one of the company's 94 kiosks, located in malls in 13 states.
"That's the Achilles' heel as Dell tries to go into this market, especially as you go into larger sizes, where people are going to want to look at it before they pony up $2,000 to $3,000," Baker said.
Dell executives counter that today's shoppers are different. As with autos, prospective buyers bone up on the specifications of technology products online. They may go to a retail store to see items in person, but ultimately shop online for the best price.
Dell's 42-inch plasma got high marks from Consumer Reports magazine, which in this month's issue rates it ahead of more expensive offerings from Pioneer, Fujitsu and Hitachi.
The company declined to discuss how many TVs it had sold since they were introduced late in 2003, but Dell lags behind the big consumer electronics makers.
