Dell Will Pull Its Computers From Retail Stores

Dell Computer Corp., a pioneer in selling personal computers directly to consumers, said Monday that it will stop selling its machines through retail stores.

“We have been losing money of late in that channel,” said Michael Dell, chief executive of the Austin, Tex.-based company. “This is a no- or low-return business. For us, it has been losing money for some time.”

The company did not specify how much it has lost in the retailing business.

Dell has stopped shipping its PCs to its five retail partners: CompUSA Inc., Best Buy Co., Wal-Mart Stores Inc.’s Sam’s Club, Price/Costco Inc. and PC World in Britain.

Dell was the first major brand to sell through retail superstores such as CompUSA, beginning in 1989. “We were first in and first out,” Dell said.

Inventory at the stores will be phased out over time, the company said.

“It marks the maturity of the company,” said David Wu, an analyst at S.G. Warburg. “When the management was young, they fell for all the distribution channels . . . .

“Well, after a while you find out there are things you don’t do well and you stop doing them--that’s called maturity,” Wu said.

Dell was unable to compete with Compaq Computer and IBM in the retail arena because its prices were not substantially lower, Wu said.

“When you cannot be significantly lower-priced than Compaq or IBM in the retail channel, you probably should get out,” he said. “I think it was smart for them to get out.”

Dell’s sales through retailers are minute compared to its direct sales.

Michael Dell said he expects retail sales to contribute less than 2% of company revenue in the second quarter ending July 31. At a peak, about 10% of Dell’s revenue came from retail sales.

By contrast, Dell’s direct sales to consumers and government and corporate customers account for about 87% of revenue.

Michael Dell said the core direct-sales business is “growing and profitable,” although he did not give figures.

He said the company is likely to incur some costs in getting out of retail distribution but that they will be offset by exiting a money-losing area.

The decision is not likely to lead to any job cuts, Dell said. Affected employees will be moved to other areas.

“We’re seeing some fairly dynamic growth in that core direct business with consumers right now,” he said, “and we’re going to continue to expand that.”

The company plans to experiment with new methods to reach consumers directly. For example, it is considering delivering catalogues and other company information through computer on-line services such as the Internet, the global web of computer networks, as well as H&R; Block Inc.’s CompuServe and Prodigy, a venture of IBM and Sears, Roebuck & Co.

Another outlet may be kiosks in places such as malls and airports, Dell said. An inventory-less system might also be set up at retailers that would simply take orders, he said.

Dell said the company expects to show higher overall revenue in its latest quarter than the $766.6 million it made in the first quarter.

“We basically expect to see a rise in revenues sequentially of a fairly modest nature,” he said.

In addition to PCs, Dell makes notebooks, servers--which control the flow of information between desktop computers linked on a network--and other types of computers.

Dell’s stock ended up 81.25 cents at $28.875 in Nasdaq trading.