Ever since Michael Dell disavowed the religious character of Dell’s direct model, strategic thinkers have been sacrificing goats, watching the stars, and generally having a high old time speculating when and how Dell might enter the channel in a more systematic way than it has in the past.  Over at Business Week, Peter Burrows, (we think he generally knows his onions) believes Dell would do well to buy RadioShack.  Burrows believes RadioShack’s 4,000-store presence would help Dell sell PCs.  We recall in the mid-late 1990s, Radio Shack had exclusive PC-selling arrangements first with IBM, and then with Compaq.  Those arrangements were anchored on Radio Shack’s reach, too, but the association didn’t seem to help the vendors all that much.  Burrows notes that for its part, Gateway tried its famous "Gateway Country" store experiment, and even though at one point, seventy-five percent of the US population was allegedly within a 30-minute drive of one of Gateway's stores, people stayed away in droves.

We wouldn’t just dismiss Burrows’s idea, although it’s one of the more…esoteric we’ve heard in a while, and we suspect it's one of the options on the table in Austin.  Dell needs to pull a rabbit out of his hat, and his company obviously needs to sell more to consumers—historically, it’s only generated about fifteen percent of its revenue from outside the enterprise.  Considering this level persisted even after the company acquired Alienware, we believe the company’s products or business model (you pick) are less and less appealing to that segment.  Michael Dell has recently been talking more frequently about the next billion users, as if there must be a consumer play in there somewhere.  At some remove, a RadioShack acquisition could make sense.  Dell could buy RadioShack for pocket change, and although some observers believe RadioShack is overvalued, we don’t.  We think the "overvaluation" speaks to strength in RadioShack’s management--investors are willing to pay about forty percent more for every dollar of RadioShack’s revenue than they are for Best Buy’s and four times as much as they’re willing to pay for Circuit City’s.  RadioShack management seems to know what it’s doing, and kudos to Burrows for digging this out.  All this said, we’d have a hard time imagining a situation where Dell could build or buy any retail chain and make money pushing its current products through it, as the model is generally high touch, and takes a lot of attention--characteristics that are not currently in Dell's core competencies.  Staffing 4,000 locations with Apple-quality technicians would prove to be a financial and operational nightmare—not impossible, but not the sort of exercise a public company could endure without expecting to take a pasting from investors.  Run for the exits if you see Dell hiring the folks who convinced Gateway to be in the real-estate business.  If Dell is to enter the channel by making an acquisition, perhaps the better acquisitions would be Lexmark (ink helped HP through some bad times), a good design firm, like Ideo, and some heavy-duty market researchers—then Dell could focus on designing products that the existing channel (maybe even RadioShack) could sell to a ready market where Dell was generating demand.  We could be wrong.