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Dell to feature AOL on consumer PCs

The world's largest direct seller of computers will ship its Dell Dimension and Inspiron systems with CDs containing AOL software.

Dell Computer and America Online have joined forces to bring AOL's service to Dell home PCs, the companies said today.

The deal, which will bring a cobranded version of AOL's online service to customers of Dell's Dimension line of home PCs and its Inspiron line of consumer notebooks, epitomizes how Internet services have become as important as hardware features when it comes to luring new customers.

The appeal of such deals to PC makers is two-pronged, experts say. The ubiquity of the Internet is driving consumers to purchase PCs in droves, and service partnerships with third parties provide a stream of revenue for PC vendors that partially offsets ever-decreasing PC prices.

"Everybody's pushing in this direction for a number of reasons," said Kevin Hause, an analyst at Framingham, Massachusetts-based research firm International Data Corporation.

"The Internet has become the killer app for consumers buying PCs, and PC companies are leveraging that trend to sell consumer systems. And, the integrated partnerships with ISPs are the key to creating ongoing recurring revenue streams," he said.

Dell will package the customized version of AOL's service as part of its ConnectDirects program, which includes access to Web portal Excite and broadband service provider @Home. Consumers who select the service will likely be using Microsoft's Internet Explorer, as it remains the default browser for AOL.

"The whole goal is to provide the best customer experience we possibly can around the Internet," said Klee Kleber, director of marketing for Dimension and Inspiron at Dell. "Quite frankly, Internet access can be difficult sometimes."

Although Dell has made its name selling computers to businesses, the company has been making more of a push in the consumer market in the last year. "In order of priority, we were focused on the business customers," Kleber said.

Additionally, competitors such as Compaq Computer and Gateway beat Dell to the punch with branded Internet services. Still, Dell is a formidable threat in the consumer market, especially as it teams up with heavyweights like AOL, Hause said.

"When the offerings are similar, the differentiation diminishes. As we move forward, it's important that all vendors need to have something like this. If they want to stay profitable, it's going to be necessary," Hause said.

"Although Dell is not a top player today in the consumer market, they are one to watch, one that the established players are concerned about, given Dell's track record," he added.

Financial terms of the deal were not disclosed. In many of these deals, however, the PC vendor retains a portion of revenue generated by the service provider. Gateway, for example, keeps a percentage of fees earned from Internet carrier services that are generated from the Yourware program.

Dell, likewise, earns revenue from these deals, executives at the company have said.