Dell shortens consumer PC warranties

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By Sumner Lemon and Joris Evers

(IDG) -- Dell is cutting warranties from three years to one on its consumer and small business PCs, saying it will keep prices lower.

Standard warranties will be shorter for the Dimension line of desktop PCs and the Inspiron line of notebooks, to help reduce system prices, says Bruce Anderson, a Dell spokesperson. The warranty reduction, which is being rolled out worldwide, does not affect PC lines targeted at corporate users, he says.

Customers aren't locked into a shorter warranty, however. Dell offers a two-year warranty and a three-year warranty as upgrades, Anderson says. Likewise, customers in some regions will have a choice of taking a shorter warranty and a lower PC price, he says.

An upgrade for U.S. customers from the base one-year warranty, which provides telephone support and on-site repair services, costs $69 for a two-year warranty and $119 for a three-year warranty. Dell is also offering a $20 discount to customers willing to accept a one-year warranty that requires them to ship PCs back to Dell's factory for repairs, rather than taking repairs on site. Returning a PC for repairs will typically take between two to three weeks, according to Dell.

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Dell is also offering U.S. customers the option of a 90-day warranty. Details on the discount granted with a 90-day warranty was not immediately available.

Service or Savings?

It's the second such services-trimming move recently. In June, Dell discontinued its live online technical support service. The company removed from new PCs the desktop icon for the Resolution Assistant, which contacted Dell online for troubleshooting help.

Dell also shortened the standard warranty for Dimension PCs sold in the United Kingdom 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. That warranty includes pickup for repairs and return within six days, instead of the on-site repair previously provided.

"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 says.

Brian Gammage, principal analyst with Dataquest, says 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," Gammage says.

Furthermore, 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," Gammage adds.

Following Trend

"It's not such a bad move," says Kitty Fok, associate director for PC research at IDC Asia-Pacific. She notes that most large PC vendors, such as IBM, also offer one-year warranties.

A distinction has always been 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 with small businesses and consumers, Fok says.

"The [PC] market is very bad," Fok adds. "It's kind of scary." Shipments of PCs have been well below expectations, she says.

In the United States, PC shipments during the second quarter are expected to decline compared to the same period last year, she says. Even China, which is viewed as one of the few bright spots in the PC industry, fell short of forecasts although it continues to grow overall, she says.