Dell Breaking With Tradition Once Again: New Machines Will Feature Linux Systems, Be Sold at Wal-Mar

May 25, 02:09 AM

Current Headlines: By Andrew D. Smith, The Dallas Morning News

May 25--Dell Inc. became the world's biggest personal computer maker through hyper-efficient simplicity. All Dell machines used Intel chips, ran Microsoft Windows and came direct from factory to customer.

Competitors eventually narrowed Dell's price advantage, though, and won customers over with greater variety and flexibility. The very model that once distinguished Dell came under assault from investors, who said that Dell would have to transform itself to save itself.

Last summer, the Round Rock, Texas, company began offering something long withheld in the name of efficiency: a choice between chips from Intel or Advanced Micro Devices. Then, on Thursday, Dell executives announced two more big breaks with hallowed traditions.

Dell factories will begin churning out three popular computer models that run Ubuntu Linux rather than Windows, effective immediately. They will also begin churning out the company's entry-level desktop for sale at all 3,400 Wal-Mart stores in the U.S. and Puerto Rico.

The announcements made little impact on Wall Street because Dell had already hinted at its plans -- Dell shares fell 37 cents to close at $25.89 Thursday -- but company observers and employees saw their true significance.

"A transformation is under way," said Dell spokesman Bob Pearson. "The company is pulsing with energy."

Two exclusive versions of the Dell Dimensions will hit Wal-Mart shelves June 10. Both will come bundled with popular accessories and cost under $700 to start.

A news release from Wal-Mart promised more Dell models will follow at Wal-Mart and Sam's Club stores. The two companies declined to predict unit sales or revenues, but both emphasized the importance of their partnership.

Dell obviously wants to make a success of its first true retail foray in years. (The company operates a store in Dallas' NorthPark Center that doesn't carry any inventory; customers can test products, then order what they want online.)

Wal-Mart thinks Dell can play a big role in its efforts to become America's biggest electronics store.

"We're excited to bring Dell into the fold to complement our current computer offerings," said Melissa O'Brien, a Wal-Mart spokeswoman. "They're a great brand."

Wal-Mart will probably have more effect on Dell's bottom line than Ubuntu Linux, but the latter may provide a more vivid illustration of the changes at Dell.

Dell decided in February that it could boost sales by asking customers for their suggestions, so the company launched a Web site called Ideastorm that collected more than 1,000 ideas in its first three days of operation.

Linux-based computers proved consistently popular at Ideastorm, which is why the company offers such computers today. In all, Dell has implemented 21 suggestions that executives got from Ideastorm, suggestions ranging from a Spanish-language blog to a flash memory hard drive.

These new programs come in addition to a host of homegrown changes. Since last summer, when Dell announced its "Dell 2.0" program for improved design and customer service, the company has overhauled most of its business units and replaced or reshuffled most of its senior management.

The most dramatic personnel change came Jan. 31, when founder Michael Dell reclaimed the role of chief executive.

"It's very unusual to see a large company transform itself to this extent in so little time. It's hard for people to abandon a model that made them successful, but it's the right thing to do," said Bob Djurdjevic, an analyst at Annex Research in Scottsdale, Ariz.

Dell discourages talk about abandoning anything, particularly its direct sales model.

"The direct model is clearly at the heart of this company, and we continue to invest in it," Mr. Pearson said. "About 500,000 people log on to the Internet for the first time in their lives every single day. The total number of Internet users will grow by 1 billion in the next three to five years. It's a rich space."

That said, Dell has no plans to confine its retail strategy to Wal-Mart.

"This is the first step in a global retail strategy," Mr. Pearson said. "There's a lot more to come."

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