Dell eyes smaller China cities, talks to Asia retailers

SHANGHAI (Reuters) - Dell Inc (DELL.O) is in talks with retailers in the Asia region and is aiming to bolster its presence in China's lower-tier cities, its Asia-Pacific president said on Friday, as it faces fierce competition in the PC market. Dell, the world's second-largest personal computer maker, hopes to make its products available in 1,000 Chinese cities compared with 45 currently, as it looks to towns with 2 million inhabitants and above, said Steve Felice, president of Dell Asia-Pacific and Japan.

"Our presence (in China) has been somewhat limited ... Most recently, we've seen propensity to buy move up dramatically in the tiers four, five and six cities," he told reporters during a conference call, but declined to give a timeframe for expansion.

Felice added that Dell was talking to retailers in the Asia region, but declined to elaborate.

Dell on Thursday posted unit growth for its third fiscal quarter of 26 percent in China, 30 percent in Brazil and 42 percent in India.

"As we expand to other tiers, we would expect our growth rate to improve in China as well. We're performing well, but we do think we can do better," Felice said.

The expansion will be achieved through increased direct sales as well as more partnerships, he said.

Dell's current retail partner in China is GOME Electrical Appliances Holding Ltd (0493.HK).

While the company's product portfolio in lower-tier cities would include lower-priced products, there was unlikely to be a dramatic shift in Dell's average price, he added.

Dell on Thursday reported lower-than-expected quarterly profit margins and warned that rising costs could depress future results, sending its shares down 10 percent.

The firm is facing increasing competition from Asian rivals including Acer Inc (2353.TW) and China market leader Lenovo Group (0992.HK) in the U.S. market, which accounts for the majority of Dell's sales.

The company, hoping to compete better with larger rival Hewlett-Packard Co (HPQ.N) and the Asian competitors, in June began selling PCs in stores for the first time after 23 years of direct-only sales via phone or Internet.

It has started selling PCs at Wal-Mart Stores Inc (WMT.N) in North America and GOME in China, and announced this week plans to sell computers in France, Spain and Belgium through France's Carrefour SA (CARR.PA), the world's second-largest retailer.

(Reporting by Sophie Taylor; Editing by Edmund Klamann & Anne Marie Roantree)