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Dell crawling out its black hole

Dell on Thursday started shipping its first Linux PCs, marking the first major PC manufacturer to do so.

A $409 investment buys you a 1.8 Ghz Core 2 Duo machine with 1GB of memory and a 250GB hard drive running Ubuntu (no monitor included). An identical system running Windows Vista is $80 more expensive. Guess what the OEM price for Windows Vista could be?

Around the same time, Dell unveiled a retail partnership with Walmart that will see Dell computers showing up in the cramped aisles of the discount retailer's stores. The partnership is significant because it marks the end of Dell's exclusive direct model.

Dell had to change. The company first saw its profit margins slide as buyers flocked to inexpensive computers that make up a market segment that is crowded with low cost Asian providers. As the company tried to move up the food chain, it los the battle over features and design from HP. That ultimately resulted in a market share shift that saw HP overtaking Dell for the number one spot.

But given the history of Dell's declining market share, the Walmart deal should raise a few eyebrows. The retailer excels in low cost, low quality products for low wage consumers. Not exactly a place to boost your profit margins.

The Linux computers at least demonstrate a willingness to gamble, but desktop Linux is as of yet an unproven market.

Dell is trying really hard to ignore HP. That company has based its PC comeback on design and unique features that appeal to end users.

Dell claims it is innovating, but its innovations are hidden from plain view: they involve cooling technology and monitor connectors. Dell has yet to create a unique or innovative computer form factor (beyond a plain big ass notebook computers and monitors).

Currently HP has the moral high ground. It's up to Dell to proof their features and design strategy wrong.

May 25, 2007 at 11:21 PM | Permalink

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