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@Home, Dell form alliance

The deal is the latest in a series of moves Dell has made as part of its aggressive Internet strategy.

    Dell and Internet service provider @Home Network are joining the growing list of companies partnering to promote high-speed Internet access, today saying they have agreed to a comprehensive marketing and technology development program.

    The two companies will make sure the @Home service works with modem-ready PCs in Dell's Dimension line for home and small business consumers. By early next year, the companies said, the partnership should result in availability of Dell PCs customized for cable modem service in areas where the @Home service is available in North America.

    Dell is trying to stay in the vanguard of a seemingly unstoppable trend which transforms the PC from the venerable standalone box to an extension of the Internet. Intel chairman Andy Grove said last week that the future of computing is networking devices that can also act as computers--rather than the other way around.

    Speaking to the evolution of the PC into a connected device, Mark Snowden, analyst with Inteco, said: "High speed Internet access opens up a whole raft of utility only available through the network."

    On the other hand, the market demand for high performance PCs is becoming less pronounced, and the remaining performance-oriented consumers are getting increasingly harder to woo.

    Thus, Dell and others are turning to parternships with Net access firms to enhance their offerings. Dell is smart to partner with people to advance higher performance machines, said Snowden. People who tend to buy cable modems need the performance offered and are generally "price insensitive" to the cost of equipment, he said.

    Dell has already done a good job of keeping its average selling prices--and its profits margins--higher than most competitors, noted Roger Kay, analyst with International Data Corporation. But as it expands its presence in the cutthroat consumer market, it has to search for ways to supplement those margins with additional revenue sources.

    Kay thinks hooking up with ISPs is a good way to get an ongoing slice of revenue, referring to the typical industry practice of sharing revenues from subscriber fees.

    The service provided by @Home enables users to download at typical speeds of between 1.5 and 3mbps (megabits per second), compared to the much slower 56-kbps (kilobits per second) speeds for dial-up modems.

    Dell's move to enhance its "ConnectDirect" initiative for boosting its consumer presence follows last month's announcement of a partnership with SBC Communications for DSL (Digital Subscriber Line) access, while @Home recently expanded its distribution channels to include retail stores.

    Earlier this week, Compaq said it would work with Bell Atlantic in a new joint marketing campaign for its high-end Presario "Internet" PCs and Bell Atlantic's Infospeed DSL service. This service is now in Washington, D.C. and Pittsburgh, and will continue to be introduced in other Bell Atlantic markets throughout the end of the year and into 1999.

    DSL transmits data over standard phone lines, and consumer service typically offers download speeds in the 1.5mbps range.

    The efforts to promote high-speed Internet access by two of the PC industry's leading names lends further credence to research surveys showing Internet access is a driving force behind computer purchases by consumers.

    Perhaps more importantly for PC vendors, @Home research shows that 52 percent of its users upgrade systems once they have the service. For PC vendors, that means consumers are buying more expensive and more profitable PCs in order to take advantage of the services offered by the likes of @Home.

    Dell has inked Internet-releated deals with AT&T WorldNet, and Excite in September and Bell Atlantic.

    "By joining forces with Dell, we're out to speed the deployment of the @Home service with a series of innovative marketing programs that will educate consumers and make the choice clear that cable is the best option when it comes to broadband Internet services," said Dean Gilbert, senior vice president and general manager of @Home Network, in a statement.

    Reuters contributed to this report.