Computer Corporation has decided to stop selling the WebPC, Dell's attempt
to break into the nascent "Internet appliance" consumer market. Dell blamed
disappointing sales and component shortages for its decision.
announced in November, 1999, with a starting price of $999, the WebPC
went through a round of price cutting in March, 2000, dropping the base
price to $799 - still higher than the $599 price from competitors.
continues to be a strong player in the business computing market.
has had numerous successes in recent years (witness their penetration
of the PC and Intel server markets), but this shows missteps can happen
to anyone. Part of the problem appears to have been the relatively high
price tag, an issue we first mentioned in December (see article, "Dell
Jumps Into Internet PC Arena") Dell's WebPC was originally priced
$999, dropped to $799 in the spring, but was still considered too high.
The market "sweet spot" for a baseline consumer appliance appears to be
around $500-$600 for an appliance with disk, and $200-$300 for a diskless
appliance. (Prices vary depending on how much processor, RAM, etc.)
leaving will have two contradictory effects on the Internet appliance
market. The effect on consumers is, paradoxically, no effect - there are
enough suppliers out there now that customers will be able to find an
appliance if they really need/want one. Although Dell is certainly a popular
brand, it's not clear that brand loyalty carries over to the relatively
new appliance market.
expect the effect on manufacturers will be greater: many of the remaining
manufacturers will now have a slightly larger market "pie" to divide.
We expect Gateway and Larry Ellison's New Internet Computer Company to
gain from this announcement. (Compaq's iPAQ is a more business-focused
machine, so not really a competitor to the WebPC.)
the same time, given the herd mentality of market, we expect that at least
a couple of manufacturers will say "If Dell is getting out of the market,
then maybe we should too! After all, look at how successful Dell is."
Perhaps Dell will send these companies a bill for market research services.
Business users will have moderate interest in this announcement, from
the aspect of a longer-term avenue being closed. (If Dell were successful
in the consumer space, they reasonably could be expected to move into
the corporate space, etc. etc.) Clearly, they can no longer include the
WebPC on the short list of appliances.
users should investigate offerings from Compaq (iPAQ), HP (e-Vectra) and
IBM (NetVista) if they decide they really really need appliances. If the
need is not immediate, corporate users (especially "power users" - those
requiring extensive desktop power for things like productivity suites)
will be better served sticking with traditional PCs.