Dell's High on High-End

Well, here we are. It's Friday, and that means it's time for your weekly sign that the apocalypse is nigh. Ready? Motley Fool Stock Advisor pick Dell (Nasdaq: DELL  ) plans to launch a premium PC brand. Stop laughing! It's true. News.com postedthe story yesterday afternoon.

Dell's new premium line of desktop and notebook computers will make its debut this fall. Mike George, vice president of Dell's consumer business in the United States, told News.com that these new models will be the "Lexus" of Dell's lineup -- referring, of course to Toyota's (NYSE: TM  ) premium auto brand. The argument goes that gearheads no longer define the high end of the market and that an increasing number of average consumers are interested in what high-end PCs can do. Dell thinks they'll pay anywhere from $1,200 to $3,500 for the premium machines.

The new models are bound to come in all sorts of shapes and sizes, but Dell says the initial group will mimic much of its XPS designs, including the 9100 series, according to News.com. And the rollout will feature a broad advertising and marketing campaign that will also highlight Dell's other high-end offerings, such as plasma TVs.

It all sounds great and well thought out, doesn't it? The problem is Dell's legacy. Much of the company's revenue and profits come from PCs priced between $600 and $1,200 -- machines that are closer to toys than they are to computers.

Dell sells good PCs at relatively cheap prices and profits by eliminating overhead whenever and wherever possible. That's one potential reason why Dell's reputation for service and support is, at best, mediocre. Witness this thread at our Dell discussion board. You can't be a premium vendor and have lousy support.

But that's not even the biggest issue. Dell is trying to enter a market segment that I believe Apple (Nasdaq: AAPL  ) already dominates. That's not to say Dell can't succeed. It could. It's just that Apple does premium PCs the way Tiffany (NYSE: TIF  ) does jewelry. Sure, there are plenty of alternatives to the little blue box. But let's not kid ourselves: If your wife wants a classic piece of jewelry and price is no object, there's really only one choice. The PC doesn't exactly equate, but it gets close. Mac buyers expect a premium product, and they get it. Dell buyers don't and don't. I'm not so sure any amount of money and marketing will ever change that.

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Fool contributorTim Beyersthinks Dell is the world's best, and most frightening, PC company. But he'll keep typing away on his Mac PowerBook, thanks. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which ishere. The Motley Fool has adisclosure policy.


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