Dell's bet to get back into gear
Will the computer maker's new approach give it the jolt it needs to recover from recent setbacks?
By Amanda Cantrell, CNNMoney staff writer

LAS VEGAS ( - Despite heavily chronicled problems in its consumer business and the recent reshuffling of its divisions, Dell is far from done with the consumer.

That's the message the company will spread this week at the Consumer Electronics Show in Las Vegas.

Dell's new XPS line of computers, which launched in September, are more expensive and high-end than previous models.
Dell's new XPS line of computers, which launched in September, are more expensive and high-end than previous models.
Here come the gadgets
Intel, Microsoft and Sony are all making big announcements at the Consumer Electronics Show. See our CES preview.

Dell (Research) appears keen on demonstrating that it remains as committed as ever to its consumer business, despite the recent decision to scrap it as a stand-alone unit and fold it into the company's small business division.

Though Dell announced that decision last October, Frank Muehleman, vice president of Dell's small-business unit, said he feels many observers took the move out of context.

"Some press (reports) misinterpreted our move as Dell backing off the consumer business," he said in an interview, adding that Dell's presence at the show, combined with a presentation from founder and Chairman Michael Dell later Thursday, underscores the company's focus on its consumer business in the U.S.

Indeed, the idea of the "digital living room" -- allowing people to download digital music, video and other media and move it around their homes -- is a big theme at this year's show.

Microsoft (Research) Chairman Bill Gates used his keynote to hammer home the concept, and Intel (Research) CEO Paul Otellini is expected to make it a big part of his speech this evening, when he will talk about the company's new Viiv chips (rhymes with "five"), built to power entertainment-based PCs.

Michael Dell is expected to tackle the topic in his speech as well.

While Dell says it's still committed to the consumer, its focus won't look the same, as the company has begun rolling out higher-end, higher-margin products and backing away from cheaper low-end desktops.

Dell's foray into the entertainment PC market, its XPS brand launched in September, is meant to appeal to high-end gamers and heavy media users. The PCs contain Intel's dual-core processors, which essentially contain two processors on one chip for more efficient computing, high-end graphics cards and other bells and whistles meant to appeal to sophisticated media consumers.

Thursday Dell announced the XPS 600 Renegade, a dual-core desktop intended for gamers, scheduled to debut in spring. It also showed the Ultrasharp 30" Widescreen monitor, which has a detailed display built for of high-definition video and graphic-intensive games.

Finally, the company launched the XPS Mobile Concept, a "portable entertainment center" with a 20" screen. The computer has a built-in camera for video messaging, a powerful speaker system and a detachable wireless keyboard.

Higher-end products tend to generate fatter profit margins for the company. That's important for Dell, particularly in light of its recent lackluster earnings, in part due to aggressive price-cutting. (Full story).

Muehleman said that while the company's low-end desktop business is not being killed off -- he said the company views the products as appropriate for "multi-PC homes" -- consumers are increasingly turning to notebooks, not desktops, for workhorse computing, and are viewing desktops as the hub of digital media at home.

"There is an overall decline in desktop sales, but not at the high end, where the XPS brand lives," he said. "We're finding that people looking at desktops want more than just Excel and Word. But for the digital home, a desktop will be the centerpiece. I'm not sure a notebook is right for housing all that digital content."

Where does that leave the low-end desktop?

Muehleman said the company still plans to sell low-end desktops to consumers, such as multi-PC families who want to buy first-time computers for their children. He added that the low-end desktop portion is still a high-volume business, though it's clearly less than what it has been.

It remains to be seen whether Dell's moves will provide the jolt the company needs to recover from recent setbacks, including two consecutive lackluster quarters and tepid guidance. Some analysts and investors worry the company's growth potential is slowing, and it could be facing a mid-life crisis. (Full story.)

The company is expected to report revenues later this month of $14.8 billion, which would be a 10 percent year-over-year increase, and earnings 41 cents a share, an 11 percent year-over-year increase.


For some of the hot new gadgets unveiled this week, click hereTop of page

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