For the past eight months, a team of technicians was holed up in a windowless room at Dell, testing 650 products from nearly 90 manufacturers. Their goal: to ensure that products like Sony monitors and Veo cameras--even printers made by archrival Hewlett-Packard (HP)--worked smoothly with Dell's machines. It didn't take them long to realize that Dell could build some of those products better and sell them more cheaply. So last week founder Michael Dell, 38, put the consumer-electronics industry on notice--including some of the company's own suppliers--that the world's No. 1 computer maker is attacking their territory.
By Christmas, Dell will launch a line of flat-screen TVs, an MP3 player and a downloadable music service, all to be sold exclusively online, as it does with computers.
At the heart of Dell's strategy is a belief that the much hyped digital home is about to become a reality, with the personal computer as the brain running movies, music and photos around the house. "Over the next several years, you can expect to see much of what was previously considered consumer electronics move into this digital home vision," the CEO told TIME. "And Dell will be there."
It's a dramatic change for Dell, long a computer-hardware maker, which earns 80% of its revenue from sales to businesses. At its headquarters in Round Rock, Texas, Dell's generals are getting used to their new role, touting themselves as the guys who will offer the lowest prices for a whole new line of products. "The battle is not joined yet," says Tim Mattox, one of those generals (otherwise known as marketing V.P.s), "but you could say we're laying the foundation for trench warfare." Consumers are going to be the winners. Although Dell hasn't revealed pricing on all the products, its entry into home electronics could send price tags of flat-screen TVs into full retreat.
Dell's invasion of your living room is part of what promises to be a free-for-all in the $100 billion U.S. consumer-electronics market. Computer makers like Dell are responding to slowing sales by leaping into new arenas, going head to head against consumer giants like Sony. In August, No. 2 computer maker HP launched 158 consumer products, most notably digital cameras to work with its market-leading printers. Gateway, which hit the jackpot last year with a $2,999 plasma TV, plans to introduce 50 more consumer products for the holiday season.