Dell offers PC leasing

Dell Computer (DELL) announced the establishment of a new business unit devoted to pursuing the consumer market, and the introduction of a new personal leasing option for consumers intended to spur repeat sales of PCs.

With its new consumer unit, Dell is hoping to attract what it calls "knowledgeable computer buyers," consumers who already own a PC or have used one at work or school. "These consumers are increasingly predisposed to the services offered by the direct model," said Dell spokesman T.R. Reid.

Dell's unit shipments in the second quarter grew by over 50 percent in both the U.S. and worldwide markets, according to both International Data Corporation and Dataquest. To maintain its tremendous growth, the company has to push into the consumer market, where it has not focused much attention until now.

The new leasing program could be one tool to help spur sales by encouraging consumers to upgrade to newer models after using a computer for a few years.

"Consumers are telling us that one of their main concerns is the obsolescence issue," Reid said, a fear which the leasing program addresses. Consumers often postpone purchases while they wait for newer technology to arrive on the marketplace. A leasing program would allow people to use newer systems without having to worry about the depreciation of the computer's value.

The program, which was introduced this month, allows consumer to lease PCs from the Dimension line and the Latitude LM notebook line for 24 months. At the end of the leasing period, the consumer can then either return the computer to Dell, extend the lease for six months, or replace the system with an upgraded one for the same cost.

Analysts were supportive of the idea of turning in an outdated computer for a new, more technically relevant one.

"I think it's going to catch on," said Michael Autrey, an analyst with Associated Research Services. Although Autrey pointed out that many times a consumer ends up spending more when they opt to lease instead of buy, "With technology you want to be able to upgrade."

Dell's new business unit will be headed by David Hood, former general manager of AT&T's WorldNet Internet service provider. Dell says it plans to triple its marketing budget for the home-PC segment.