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Dell to go ISP alone
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July 16, 1999: 4:41 p.m. ET
Computer maker will offer its Dell.net service stateside, not acquire ISP
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NEW YORK (CNNfn) - Dell Computer Co. will begin offering Dell.net, its European Internet access service, in the United States, making it unlikely the company will buy an existing Internet provider such as Mindspring.
Chairman and Founder Michael Dell announced the plans at the company's annual shareholder meeting in Austin, Texas Friday.
Dell said its Dell.net service, which is currently offered in Britain and Germany and is being rolled out in other countries, will be available in the United States soon, but did not elaborate on when.
Dell Vice Chairman Kevin Rollins said Friday the move means it is unlikely to acquire an ISP to use for this function. He explained Dell could partner with other companies and use its own resources to provide Internet service without paying top-dollar tech stock prices.
"If you look at Internet companies today that have no earnings but have a lot of stock value and the high cost to buy them, we can't see in our business model where it makes a whole lot of sense," Rollins told Reuters.
One such ISP was Mindspring (MSPG), which was rumored to be a possible acquisition for Dell. Its stock has seen a run-up in recent weeks as word of a possible deal spread through Wall Street. Its shares gained 1-13/16 to 48-13/16 in late Friday trading while Dell (DELL) shares shed 9/16 to 43-3/8.
Computer makers, faced with tightening profit margins, have worked to leverage the advantages they have as manufacturers of such equipment.
Specifically, they have reached deals with Internet service providers, allowing them to place an icon on their desktops offering the service from the moment they first boot up their computers.
Increasingly, however, computer makers believe they can offer their own Internet access, generating ongoing revenue from the computer after they ship it out.
Additionally, companies like Gateway and Dell have begun plans to offer rebates on low-cost computers provided the buyer signs up for multiyear access from the computer maker's provider.
The rebate usually covers the cost of a low-end computer, making the PC effectively free. The manufacturer then makes up the cost of the computer with the cost of the access.
-- from staff and wire reports
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