Dell cuts consumer PC warranties worldwide

In a move intended to lower its prices, Dell Computer Corp. has decided to reduce the warranties on its consumer and small business PCs from three years to one, a company spokesman confirmed Wednesday. The announcement comes in the midst of a global slowdown in PC sales.

The decision to shorten the standard warranties for the Dimension line of desktop PCs and the Inspiron line of notebooks was made in a bid to reduce system prices, said Bruce Anderson, a spokesman for Dell. The warranty reduction, which is being rolled out worldwide, does not affect PC lines targeted at corporate users, he said.

Users aren't locked into a shorter warranty, however. Dell is offering a two-year warranty and a three-year warranty as an upgrade to interested customers, Anderson said. Likewise, customers in some areas will also have the option to receive a shorter warranty, and a lower PC price, he said.

In the U.S., prices for the upgrade from the base one-year warranty, which provides for telephone support and on-site repair services, are US$69 for a two-year warranty and $119 for a three-year warranty. The company is also offering a $20 discount for users willing to accept a one-year warranty that requires them to ship PCs back to Dell's factory if a repair is needed. That process will typically require between two to three weeks, according to Dell's Web site.

Dell is also offering U.S. customers the option of a 90-day warranty, according to information posted on the company's Web site. Information on the discount granted with the selection of the 90-day warranty was not immediately available.

In Europe, Dell shortened the standard warranty for Dimension PCs sold in the U.K. from three years to one year in early July. The rest of Europe is set to follow on August 1, according to Pierre Vigna, marketing director for Dell's Dimension product line in Europe.

The new one-year warranty is based on collect-and-return service, where Dell picks up the PC and returns it repaired within six days. The old three-year plan included on-site repair in the first year and two years of collect-and-return service, Vigna said.

"This is to show our willingness to offer better value to our customers. We did extensive research and most of our customers told us that they didn't need a three-year warranty. Those who did want it were very willing to pay extra. We will be able to lower our prices as there definitely is a cost for those two extra years," Vigna said.

Brian Gammage, principal analyst with Dataquest Inc., a unit of Gartner Inc., said Dell is trimming costs.

"Dell is saving itself some money. Warranty is difficult to quantify because it depends on how much the customer uses it, but there is a warranty cost. Dell is removing a risk element from its cost structure," he said.

Furthermore, Gammage said, the warranty cutback shows Dell "intends to continue with the price aggression it has showed all year" as it "creates a small space for price cuts."

"It's not such a bad move," said Kitty Fok, associate director for PC research at International Data Corp. Asia-Pacific, adding that most large PC vendors, such as IBM Corp., also offer one-year warranties.

There's always been a distinction drawn between corporate and consumer customers and it's more important for Dell to keep up its service levels with its major corporate customers than for small businesses and consumers, Fok said.

"The (PC) market is very bad," Fok continued. "It's kind of scary."

Shipments of PCs have been well below expectations, Fok said.

In the U.S., PC shipments during the second quarter are expected to show negative growth compared to the same period last year, she said. Even China, which is viewed as one of the few bright spots in the PC industry, fell short of forecasts,although it continues to show growth overall, she said, adding that shipments during April and May were particularly slow.

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