Top 5 Reasons for a Dell-Wal-Mart Hookup

Welcome to the Daily 5, our "Foolish" look at the business news that amuses us.

Dell (Nasdaq: DELL  ) and Wal-Mart (NYSE: WMT  ) are hooking up -- again. Last year, the Bentonville behemoth said it would sell Dell's PCs through 3,500 of its locations. Now, The Wall Street Journal reports that Wal-Mart wants its partner to service computers sold through its stores.

Why do this deal now? Perhaps because Dell is tired of watching Hewlett-Packard (NYSE: HPQ  ) pack in the profits as Apple's (Nasdaq: AAPL  ) Macs perform a market-share land grab. But we have less likely (OK, not-at-all likely) ideas of our own. Here are the top five reasons Dell and Wal-Mart are hooking up. Drumroll, please:

5. Because Dell needed a deeper bench to take on Best Buy's (NYSE: BBY  ) Geek Squad in corporate softball.

4. To remedy a color forecasting mishap: Where else can Dell dump all those "safety orange"-colored PCs?

3. Because Dell's still smarting over Dell Dude's drug bust -- and no one's cleaner than Mr. Smiley Face.

2. Why go to India for cheap labor when it's right here in the good 'ol U.S. of A?

And the No. 1 reason for a Dell-Wal-Mart hook-up ... Three words: Michael Dell, greeter.

Geek Squad, meet Cheap Squad
As odd as this deal strikes us, we actually like it for two reasons. First, Dell has little retail experience (ergo, not much chance of beating Apple as a seller of upscale wares). Second, Wal-Mart once wanted to be your bank. PC service is much closer to its retail roots, and here, a partner is providing all the expertise. Eat that, Best Buy.

See anything we missed? Have a different take? Post your thoughts in the comments box below.

Always further Foolishness. Always:

Neither Fool contributor Tim Beyers nor Dayana Yochim owned shares in any of the companies mentioned at the time of publication. The Motley Fool owned shares of Best Buy.

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  • Report this Comment On July 18, 2008, at 7:16 PM, sgupta17 wrote:

    There are three benefits of this partnership: cost savings, additional revenue for service, and additional revenue from in-store customization / upgrading.

    First, this article neglects the possible cost savings. If you have had a Dell laptop in a major metropolitan region, you know that they sometimes hire independent contractors to come out to your home to repair the computer. This service model is very expensive.

    Second, this article neglects the convergence of computers, television, and audio and the proliferation of wireless networking that are often difficult for novices to install for novices. This collaboration positions Dell well to exploit these two trends to sell additional hardware.

    Lastly, this partnership allows for mass customization of Dell computers. These in-store technologist could easily upgrade software and hardware for each PC sold at Walmart. By using designated Dell installers, customers could not only enjoy the benefits of customizing but also ensure that they do not void their warranty. Additionally, this could be an extended service warranty that could be an additional revenue stream to both Dell and Walmart.

    This partnership makes sense in a lot of ways including culture. Both are cost leaders and should be able to develop a model that will drive down cost and take advantage of economies of scale that produces such as HP will not be able to replicate.

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