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Dell PCs to Sell at Wal-Mart; Deal Hurts Chip Stocks

Reuters
Thursday, 24 May 2007 | 3:00 PM ET

Computer marker Dellplans to start selling personal computers at 3,000 Wal-Martstores in the United States and Canada as of June 10, launching a major drive to sell its PCs through retailers, a company spokesman said.

The move represents an attempt by Dell to better compete with Hewlett-Packard, which has overtaken Dell as the world's No. 1 PC maker, partly through a strategy of selling in the United States through major retailers including Wal-Mart, Circuit City Storesand Best Buy.

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Dell currently relies mostly on a direct sales model via the Internet, mail or phone orders, though its products are available in limited quantities through some retailers, such as Costco Wholesale.

Dell-Mart?
Dell tweaks its direct sales model and decides to sell computers in Wal-Mart, with CNBC's Bertha Coombs

Wal-Mart plans to sell two Dimension multimedia desktop computer models that are currently available directly from Dell in bundles for under $700. Officials from both companies declined to say how those bundles will be equipped. They will be available at the company's Wal-Mart stores and its Sam's Club chain.

"While we can't get into specifics, in the coming quarters there will be additional activity in support of this move into global retail," Dell spokesman Bob Pearson said. "Today's announcement with Wal-Mart represents our first step. Stay tuned."

He said the company plans to add additional retailers in its top 10 to 15 markets. Those countries include the UK, Germany, France, Japan, China, Brazil and Japan.

Chip Makers Hit by Deal

Semiconductor shares fell sharply after Dell and Wal-Mart announced the deal, as concerns grew that chip producers' profit margins may get squeezed by the pact. Wal-Mart has a reputation for leaning on its suppliers to cut prices.

The Philadelphia Stock Exchange Semiconductor index slid 1.3%. Shares of Intelthe world's largest chip maker, dropped roughly 2.5% , while Advanced Micro Devices declined about 2%.

Intel, which trades on the Nasdaq but is also a component of both the Dow average and the S&P 500, was among the biggest weights on all three stock indexes.

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