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Dell Reboots.

The U.S. computer maker takes aim at Latin America once again.

LUIS CANTU IS CONSIDERED A SAVior around the halls of Reforma, a daily newspaper in Mexico City. When their computers crash, reporters call him to get their PCs up and running again so they can make their deadlines.

But when he is unable to fix the problem, Cantu knows who to call: Dell Computer Corp., which sold Reforma its machines. If a system cannot be set right over the telephone, the company will dispatch a technician to the newspaper within 48 hours. Cantu is so impressed with the computer maker, he's looking to buy another 60 to 70 PCs from the company this year as a backup in case of a potential Y2K meltdown. Mural, a new sister paper in Guadalajara, is 100% stocked with Dell computers, and El Norte in Monterrey is moving in that direction. "We're totally happy with Dell," he says. "They're fast, efficient and a good price."

Reforma is just the beginning. The US$18 billion (sales) computer maker based outside Austin, Texas, has recently targeted Latin America as its next big growth region. Over the past year, Dell has opened offices in Bogota and Santiago, joining an existing office in Mexico City. Manufacturing facilities in Brazil are nearly complete and a new Spanish-language web site that will allow Latin American consumers to buy custom-made PCs over the Internet is coming online.

"They're ramping up in the region and they're investing," says Loren Loverde, research manager at IDC Latin America, a unit of computer research firm International Data Corp., who recently met with the company. "They've clearly got a new focus there."

Until now, Dell has shown only a halfhearted commitment to the region. IDC ranks Dell as the fifth-largest computer maker in Latin America last year with only 2.9% of the $6.82 billion PC market, trailing behind such competitors as Compaq Computer, International Business Machines, Hewlett-Packard and Acer. But that's certainly an improvement over last year, when it ranked a dismal 14th place with only 1.5% of the market. Dell won't divulge market share figures or confirm IDC's numbers.

The first forays into the region began around seven years ago; Dell even opened a local configuration facility outside Mexico City in 1993. But about a year later, it closed the plant--as well as several others around the world--when it moved to a more centralized manufacturing model focused around its Texas and Ireland facilities. Mexico's peso devaluation and its domino effect across the region certainly didn't whet Dell's appetite, so it turned its sights eastward, opening up a facility in Malaysia to serve the Asia/Pacific market, including Japan, and in China to serve that vast, fast-growing country.

Dell didn't desert Latin America entirely, however. The company continued to sell computers in the region through local distributors. But it later dumped them for the direct model that made the company famous and rich in the United States, in which customers call a toll-free number, select and configure the PC and then have the system shipped to their home or business. A Mexico City office was launched four years ago to serve corporate clients but customers in other countries still had to call its Texas headquarters. In 1996, Dell also began offering a Spanish-language version of its U.S. web site that allowed Latin Americans to order preconfigured systems over the Internet.

Brazil delayed. Not until last year did Dell start getting serious about making a mark farther south. In August, the company announced that it would open a 123-acre manufacturing and customer center in Alvorada, Brazil--in the state of Rio Grande do Sul near Porto Alegre--to serve the entire Mercosur market, including Argentina, Uruguay, Paraguay and Chile. Total investment: $125 million. "The expansion into Brazil is a significant milestone for Dell as we continue our global expansion," Dell's vice chairman, Kevin Rollins, said at the time.

Unfortunate timing, to say the least. Five months later, Brazil devalued the real, and the country's booming consumer-driven economy quickly crumbled under the weight of high interest rates.

Since then, Dell has been tight-lipped about when the Brazilian facility will begin operating. An August press release said it would open in 1999. Daryl Robertson, who helped Dell break into Asia and Australia before becoming vice president of Dell Latin America, will only say that Dell plans to be producing and delivering product in Brazil "within a year." "Brazil is a fairly turbulent market right now," he says. "The devaluation and the economic problems are a concern to all multinationals operating here, and we're monitoring the situation closely and hope for the stabilization of the real and the recovery of the economy."

Self-service site. But Robertson denies that Dell has recoiled since the devaluation. "We're continuing with our plan," he says repeatedly. "We regard Brazil as a strategic market long term and we're committed to our expansion there as a key element in Dell's globalization strategy."

Sources outside the company say Dell is already producing a limited number of systems at a temporary facility in Brazil. An operator at Dell's U.S. call-in system says the permanent facility should be open and fully operational later this spring [May].

In the meantime, Dell has been putting the finishing touches on its new Latin American online store, which was expected to go live during the second quarter. Until now, consumers in Latin America could only buy standard systems over the Internet because of the difficulty of calculating shipping charges and customs duties based on the weight of the peripherals and their features. If Latin American customers wanted a special configuration, they had to pick up the telephone and call Dell's Texas headquarters. Now they will be able to order any system they want, configured any way they want, all in an automated process over the web.

"We had a lot of orders from folks in Latin America who would go to our U.S. web site and say, 'Hey, why don't you have a site tailored to our needs?"' says Chris Hinkle, Dell's manager of Latin America Online, who set up the company's online store in Japan before working on the Latin American version. "[This] will allow customers to go in and pick the product they want at the exact configuration they want."

Being able to configure their own systems with the latest, greatest technology will be new for many Latin Americans, who have been forced to travel to the U.S. to buy what they wanted or rely on whatever computer retailers had in stock--which, in many cases, meant older, outdated hardware and peripherals when faster and larger models were available. Indeed, when Intel introduced the Pentium II processor in April 1998, it took Latin American resellers almost four months to push the slower computers out the door before they could begin to sell the newest machines. "Whatever the distributors bought, that's the product they're pushing," says Sylvia Acevedo, Dell's director of online and marketing for Latin America who worked with Hinkle on building the web site. "Dealing directly with us, you can order the latest in technology."

After Latin American customers place their orders, the computers will be assembled at Dell's manufacturing facility in Texas and shipped out. Once they reach their destination, consumers can either pick them up at customs and pay all the duties themselves--or, for a small fee, allow Dell to arrange for a local logistics provider to pay all the duties and fees and deliver the system to their door.

If they have a problem with their new system, Latin American customers will be able to call a toll-free number and a technician will walk them through it. If the problem can't be fixed over the telephone, Dell will send a trained technician to their home or office within 48 hours. All this is free for the first year. After that, Dell offers an extended warranty through the second and third year for a nominal fee.

Too few eyeballs. Dell plans to launch future features to its Latin American web site that Americans are familiar with in the U.S.: A way to check the status of your order--whether it's being assembled, processed or shipped--in real time; "Ask Dudley," which allows the user to pose a question to its "virtual technician" and get a response; and the ability to download file drivers, which allow the computer to communicate with different peripherals, such as printers.

Dell's online initiative sounds great. There's only one problem: too few eyeballs. According to Boston-based research firm the Yankee Group, there are only 2.5 million active Internet accounts in Latin America, making the region home to fewer than 3% of the world's web users due to low PC penetration, poor infrastructure, high tariffs and insufficient local content.

The Yankee Group expects the situation to change, however, as markets become fully deregulated; tariffs fall, infrastructure improves and local content becomes more abundant. Once that happens, the potential Internet market in the region could balloon to 90 million users, according to one estimate.

When Internet penetration does improve in the region, will Latin Americans buy their computers over the Internet? Acevedo, a first-generation Mexican-American and veteran of Apple Computer and IBM, believes they will. "What we've found is really innovative and early adopters of technology," she says. "They'll fly to Miami or Houston or McAllen or Los Angeles or ask someone who's going there to buy them the latest technology. With our online store, you won't have to do that."

Dell recently began offering its Latin American corporate clients something called Premier Pages, customized web sites that allow them to review their computer-buying history and order new systems as needed. Dell has set up such pages for 1,500 companies around the world, including Ford Motor Co., Pricewaterhouse-Coopers and Boeing, which is said to have ordered 1,000 Dell computers in one week through the service.

Since launching the Spanish-language version of Premier Page at the end of last year, Dell has already signed up 40 companies in Latin America, including such multinationals as Ford, Motorola and Northern Telecom. Reforma may be next. Cantu says he's working with a Dell representative in Mexico City to set up the newspaper's own "Premier Pagina." Dell plans to add a Portuguese version later this year.

Can Dell's direct approach work in Latin America? IDC's Loverde thinks so. "A lot of people have expressed doubts about a number of aspects to the direct approach: service, timing, Latin culture," he says. "But I think that the culture is changing, and Latins are going to open up to purchasing on the web."

Years of globetrotting have convinced Dell's Robertson that his company's business model trumps local culture. "Customers want the same thing worldwide: They want a high-quality product, they want low prices and they want good service," he says. "We've done that in Europe, we've done that in Asia, we're doing it now in China, and we're going to do it in Latin America as well." The only question is whether this time the build-to-suit computer maker is here to stay.
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Publication:Latin Trade
Geographic Code:0LATI
Date:Jun 1, 1999
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