Dell Wants Your Home

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Even after that, Dell was not planning its all-out move into consumer goods, executives say. But by summer, as they looked closely at competitors' products, they decided to take the plunge. While rumors were spreading that Dell was working with Microsoft on new products like smart phones, it changed its name, dropping the word computer to become just Dell Inc.

Callers to Dell's support lines, meanwhile, were already looking to Dell for help with their consumer electronics. Their big complaint wasn't about hardware anymore but that many new digital gizmos did not work with Dell computers. "Consumers feel they haven't been well served by consumer-electronics companies," says George. "These companies always have the next hot thing, which doesn't work with the last hot thing and doesn't work with the competitor's next hot thing. So you're always in the wreck-and-rebuild stage."

It was an important lesson, because Dell isn't likely to produce many next hot things. The company, which spends a mere 1.5% of its $38 billion in revenue on research, isn't concerned with being innovative, says John Hamlin, general manager of Dell's U.S. consumer business. "We're not first," he says. "We just do it better. We're not embarrassed to admit it. We've come out of nowhere to be the No. 3 consumer brand in the U.S. in less than five years, while Coca-Cola has been doing it for 100 years." Of course, adds Hamlin: "We're not in this to be No. 3. No. 1 is the only target around here."

For now the No. 1 in consumer electronics remains Sony, a true innovator. To conquer the consumer market, Dell wants to solve the gadget-compatibility issue and speed the transition to the digital home. So Dell recently — and quietly — began offering basic home installation of computer networks for $119. The Dell.com site, which will be revamped on Oct. 10, even has a search engine to help homeowners locate providers of broadband service, another prerequisite for the coming digital transformation.

To manage all the music, video and digital photos pouring out of new gadgets on the market, the company last week copied its competitors and introduced a Microsoft program, dubbed the Dell Media Experience, that will come preloaded on all new Dell Dimension computers. "In time we hope it will become a central repository for the family," says senior vice president John Medica. For now, at least, the product has one big advantage: it's free.

Dell is approaching its latest challenge with characteristic swagger. Consumer electronics is cutthroat, goes the knock, and selling high-ticket TVs online won't be easy. Shoppers like to see their TVs before buying. "Yeah, I heard that about computers too," says Dell dismissively. As the only computer company to make money for eight straight quarters during the recession, Dell has little time for skeptics who constantly try to paint it as an unimaginative box mover. Three years ago, the company was No. 6 in computers, with a puny 6% share of the U.S. market. Today it leads, with nearly a 30% share. Enderle says Dell's consumer foray, more so than HP's or Gateway's, is a "bellwether" of changing markets. "When a market is about to explode, Dell moves in," he says. "If it's moving into flat-panel screens, then you can be pretty sure that a lot of them will be sold this year."

Dell denies that his company, born nearly 20 years ago in his University of Texas dorm room, is truly morphing into a consumer-electronics company. He just sees a way to make more money. "I wouldn't say we're going to be Sony," he says coyly. "But look at large markets where products cost more than they should, and it's almost a certainty we'll go into them." So get some popcorn, settle into a recliner and stay tuned for more announcements.