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 The Computer Buzz December 2nd, 2010     


Nome and Paul Van Middlesworth - owners - The Computer Factory

Bargains

Spend time before you spend money.” It’s the mantra of the savvy shopper. Most of us do just that when we shop for a car, boat, house, entertainment center, major appliance, home improvement services and other big-ticket items. We shop around and compare prices, features and quality. We may not always go for the lowest price but we do want to get the best value for the money we spend. When shopping for a new PC that can be difficult.

Folks sometimes ask us to compare our desktop PCs to the retail “package” PCs listed in “big box” retail ads from Fry’s, Staples, Best Buy, and Costco, etc. It’s a difficult thing to do. It’s not because we don’t know the difference. It’s because when we start talking about the performance, quality and service levels of Dell, Compaq and HP PCs (hereafter referred to as “packagers”) compared to the PCs we build, our voices become shrill and flecks of foam form in the corners of our mouths. It’s not a pretty sight.

The problem is that just talking about these PCs causes emotional stress. We were raised on the maxim “if you can’t say something nice, don’t say anything at all.” Finding something nice to say about a Dell is like saying Charlie Manson has nice hair.

Each year we repair and upgrade hundreds of Dell, Compaq, Gateway, E-Machine, and Sony desktops. We know them well. In terms of performance, quality and reliability. There is little to choose between them. All of their most popular, low cost (under $600) models are simply poor in performance, quality and reliability.

Packagers” keep their prices low by loading them with “junkware.” Here’s how it works. A “packager” (we’ll call it Dellpaq) places a large order for PCs with an Asian PC maker. Dellpaq pays $500 per PC to have it designed, manufactured, labeled and drop shipped to a retailer like Costco or Best Buy. Dellpaq then sells the PC at cost ($500) to the retailer who marks it up 15% and sells it for $575. You buy the PC for only $75 more than it cost to manufacture and ship it.

How did the “packager” make a profit? Dellpaq had the Asian manufacturer embed advertising programs from 67 advertisers (pop-ups, links, trials) in the PC’s Windows operating system. Each advertiser paid Dellpaq an average of $1.55 to be included. Dellpaq got (67 X $1.55 = $103.85); over one hundred dollars for each PC. If Dellpaq sold as many PCs annually as Dell (40 million) it would add up to a 4 billion dollar gross profit. Not bad for making a few phone calls and never having to touch a PC.

Dellpaq still must provide warranty for a year but that’s not a problem. They dumped their warranty liability to a third party. The low bidder charged them $7.50 per PC to take over their warranty contracts.

So there it is. Your bargain PC is made from the cheapest components available, is crammed with junkware, and has horrible after sale warranty and technical service, but at least you’ve done your part for the world economy.

 
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