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Dell: Home is where the PC is

Michael Dell argues that the PC should be the center of entertainment in the home, but how is his company planning to realize that vision?

Desktops
BOSTON--Michael Dell elaborated Wednesday on his vision of the PC becoming the nerve center of home entertainment, but he was vague about how the company plans to achieve that goal.

Speaking at the Massachusetts Institute of Technology's Emerging Technology Conference, the Dell CEO hinted that the company is working with wireless technology for home networks and is seeking to license content such as movies and music.

"The PC is becoming more and more the center of the entertainment experience," Dell said during a 45-minute question-and-answer session at the conference. "The PC is not just a computing device--it's entertainment, it's music, it's videos and it's television."

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What's new:
Michael Dell argues that the PC should be the center of home entertainment. His comments provide few details, but he is expected to elaborate during a conference call with reporters on Thursday.

Bottom line:
As the leading PC maker, whatever Dell does will have an impact on computer makers (such as Hewlett-Packard), consumer electronics giants (Sony and Philips), and companies that are trying morph into a combination of the two (Gateway).

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Dell indicated that the company is developing a way for multiple devices--which may be scattered throughout a home--to access files such as music and videos stored on a PC.

"If you think about the other (consumer electronics) devices in the home, typically they are proprietary technologies?and they don't work together as well (as they could)," he said. However, "if you have an (Internet protocol) network in the home, all the devices are connected. That's a much more compelling vision than what we have today."

While he was short on specifics at MIT, Dell is expected on Thursday to elaborate on his plans to expand into the consumer electronics market with the introduction of several new Dell-branded devices.

Dell, whose company has put its name on only a small number of types of product--such as printers and network switches--is expected to discuss plans for a portable music player with a hard drive and for at least two liquid-crystal display televisions, during a conference call with reporters.

The company also is expected to discuss its new line of Axim handhelds and changes to its online store.

Currently, it is working on a Media Center PC based on Microsoft's Windows XP Media Center Edition 2004 software, which is due to be released later this month.

Dell won't be alone in its efforts to tap the home electronics market. The company looks likely to face stiff competition from Hewlett-Packard and Gateway, as well as from traditional consumer electronics makers like Sony.

As a result, Dell's home strategy is likely to receive much of the same criticism its competitors have levied against it in the past. The Round Rock, Texas, PC maker is often portrayed as being superb at cost-cutting but light on innovation.

Dell appeared to head off such criticism in his comments on Wednesday. "Innovation comes in many different forms. There's technology innovation. There's innovation in terms of process, manufacturing supply chain, distribution and logistics," he said. "Sometimes inventing things is confused with innovation. (At Dell,) it's important you do things that provide value for the customer."

While rival HP spends billions of dollars per year on research and development, Dell spends hundreds of millions of dollars and claims to garner a better return on its investment.

Dell reported $35.4 billion in revenue during the 2003 fiscal year, but spent only $455 million on research and development, according to its annual report. By comparison, HP had revenue of $56.6 billion and spent $3.3 billion on research and development during fiscal 2002.

"That's different from some other companies, but I'd also point out that the returns that any investment we'd make in any of those areas, specifically R&D, is far higher than our competitors," Dell said. "So maybe we're on to something,"

Dell often works with partners such as Intel and Microsoft, which spend billions of dollars on research and development, while focusing its own research on specific areas.

For example, Dell has funded research into developing software for high-performance computing clusters, which tie together large numbers of computers and play to Dell's strength as the leading computer manufacturer.

It will do the same with consumer electronics gear such as televisions, Dell hinted, because an LCD television is simply a monitor with a TV tuner. Dell already sells a large numbers of LCD monitors with its PCs, he noted.

"Our model is not to reinvent things we get from our partners. We don't want to reinvent the things an Intel or Microsoft are doing. That's not innovation," he said. "That's waste."

Ultimately, Dell hopes to take its brand of innovation to the bank. It aims to double revenue to $60 billion over the next few years, largely by selling new products such as consumer electronics and information technology services.

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