Dell ties up with GOME to sell PCs in China

BEIJING Mon Sep 24, 2007 6:28am EDT

A man talks on his mobile phone as he walks past a GOME Electrical Appliances store in Beijing, April 18, 2007. Dell Inc said on Monday it would sell its latest range of personal computers through China's largest electronics retailer, GOME Group, aiming to improve on its single-digit mainland market share. REUTERS/Claro Cortes IV

A man talks on his mobile phone as he walks past a GOME Electrical Appliances store in Beijing, April 18, 2007. Dell Inc said on Monday it would sell its latest range of personal computers through China's largest electronics retailer, GOME Group, aiming to improve on its single-digit mainland market share.

Credit: Reuters/Claro Cortes IV

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BEIJING (Reuters) - Dell Inc DELL.O, the world's No.2 personal computer maker, said it would sell its latest range through China's largest electronics retailer, GOME Group, aiming to improve on its single-digit mainland market share.

The tie-up with GOME Electrical Appliances Holding Ltd (0493.HK) follows similar moves in the United States by Dell to expand beyond its direct-sales model to increase sales and market share after losing the top-selling PC slot to Hewlett-Packard Co (HPQ.N) last year.

"This adds another dimension to the Dell direct model," Michael Tatelman, vice president of marketing and sales for Dell's global business, told reporters.

The China market is dominated by domestic giant Lenovo (0992.HK), whose 35 percent market share is nearly triple nearest rival HP's.

"Dell has not been very aggressive in the China market, but is showing it is willing to make a commitment to the mainland market," said Antonio Wang, a PC analyst for IDC.

While analysts said the move was positive for Dell, they noted that computer sales in China were being driven by fifth- and sixth-tier cities, a market where GOME does not have a strong presence but is expanding into.

"We will grow with GOME," said Tatelman.

Dell would also have to deal with the problem of taking care of customers as it would need to train GOME employees to understand and sell Dell's product line.

"Sales service does matter in the PC business," said UOB Kay Hian's Mark Po.

Dell's move also demonstrates the rising competition in the global PC industry where Taiwan's Acer Inc (2353.TW) agreed to buy loss-making Gateway GTW.N for $710 million last month.

Acer's move could push it past Lenovo as the world's No.3 PC maker and underscores the importance of scale in the highly competitive global computer industry.

FAST GROWTH

Dell reckons China's PC market -- now the second largest behind the United States -- is growing at 18-20 percent annually, and the mainland's desktop market could surpass the United States in a couple of years.

The personal computer market in Asia excluding Japan grew 22 percent to 14.3 million units in the second quarter, boosted by 50 percent growth in portable PCs, according to market researcher International Data Corp.

Lenovo remained the region's dominant PC firm with a market share of 20.7 percent in the second quarter, up from 17.7 percent in the previous quarter, said IDC.

For GOME -- where sales of information technology products account for only about 10 percent of total sales -- the addition of Dell adds to its growing list of PC brands.

"We think in the next 2-3 years we will become the primary conduit through which Chinese consumers buy computers," said Wang Jinzhoum, a GOME vice president.

Beijing-based GOME will start retailing Dell products next month in 50 of its stores. GOME has more than 700 outlets nationwide which sell computers.

Shares in GOME fell as much as 12.6 percent early on Monday when trading resumed after a share sale, and ended the day down 8.7 percent.

A shareholder in the company last week was selling up to HK$2.39 billion (US$307 million) of shares in GOME at a discount of 6-8 percent below Thursday's close.

($=7.51 yuan)

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