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Dell to open Gigabuys.com

Dell's online shopping site is expected to match efforts by other PC vendors to transform themselves into one-stop resellers of both PCs and related equipment.

Michael Dell, the company's CEO, will tomorrow unveil a new online shopping site called Gigabuys.com that offers thousands of computer products from a variety of vendors.

The new online store will be aimed at home and small-business customers and be called Gigabuys, Dell told News.Com in an interview today. Dell itself will handle the customer order process but not stock inventory from other companies, he said. Delivery will likely be handled by a distributor or electronic reseller.

As first reported by CNET News.com, the site essentially will allow the company to capitalize on the success of its own Internet sales. "We get about 25 million visitors to our Web site a quarter," Dell said. "[The goal is] to be able to sell those customers anything they buy that goes along with their PC--printers, software, modems, networking cards, add-ons--and to have one common shopping cart."

Dell's effort is expected to match efforts by other PC vendors to transform themselves into one-stop resellers of both PCs and related equipment. Meanwhile, unlike rival direct seller Gateway, Dell has no plans to open retail outlets.

With the announcement, Dell officially joins the ranks of PC players who are looking to create ongoing revenue streams to offset ever-decreasing PC prices. Dell has been selling third-party products for a while, but not with the same emphasis the Round Rock, Texas, company appears to be putting behind Gigabuys.

Just last week, Gateway purchased a stake in the online division of NECX, a Massachusetts-based reseller of PC equipment and software in an effort to rope in additional purchases that might have gone to a traditional brick-and-mortar reseller down the block.

Compaq is pursuing a similar strategy, having announced its intention to acquire online vendor Shopping.com. The company hopes to steer users of its AltaVista portal to its own shopping site.

The need to expand comes from increasing competition in the market for large corporate customers, say analysts. Dell's growth rocketed skyward in this segment for over two years, posting an especially strong first half of 1998, when many other vendors were dealing with inventory problems. But now, concerns about how Dell and other PC vendors can continue to grow while maintaining profitability are mounting. The new venture is intended as a means to bolster the balance sheet.

Dell talked about its efforts to sell third-party products in a recent conference call with analysts. While the company is positioning this as a service for consumers, Dell executives and other direct PC execs have said that third-party products are going to increasingly become a part of the bottom line.

"Soon we will be offering an expanded range of software and peripherals," said Dell CFO Tom Meredith in a conference call with analysts, calling the upcoming service a "new store."

Currently, Dell customers can get third-party products, such as switches or software, through the company's DellWare site. DellWare, however, is not heavily marketed but listed at the bottom of Dell's product offerings. Blink, and you might miss it. DellWare orders are largely managed and fulfilled by distributor Ingram Micro, according to Ingram executives.

Recently, Dell has registered two domain names, "Gigabuys.com" and "Terabuys.com," as well as variations on those domains that are possible names for the new stores, according to CNET News.com research.

Dell executives were speaking about third-party product expansion already at last year's Fall Comdex trade show, even before earnings were leveling off a less-stratospheric rate of 49 percent for the most recently completed quarter.

"It would not surprise me in the future if the No. 1 distributor for HP printers is Dell," Joe Marengi, senior vice president and group general manager at Dell, told CNET at Comdex last year. The company, he added, is already the third-largest reseller of enterprise software licenses for Microsoft.