Last modified: December 31, 1997 8:55 AM PST
Sub-$1,000 PCs: The future on a budget
Like people, pivotal
events have distinct characters. Some, such as the Treaty of Versailles or the atomic bomb, leave indelible marks on the
contemporary scene; while others, such as the discovery of Archimedean water plow, the Watergate break-in, or the invention of transistor, seem fairly unremarkable at the time. The latter is certainly the case with the sub-$1,000 computer.
In comparison to the Internet, the arrival of the low-cost computer stands as a fairly dowdy occurrence. Technologically, the sub-$1,000 PC broke little new ground. It exists mostly because parts got cheaper.
As a vehicle to spread technology, however, the low-cost PC appears destined to define the future.
Inexpensive PCs will likely begin to pop up
in corporations and also as the second and third units in wired homes. The cheap computer comes too at a time when population giants such as China
and India are rising in economic strength and looking for large volumes of affordable byte-crunching machines.
Advocates of network computers, Java stations, Windows-based terminals, Net PCs, and other low-cost machines will claim--often rightly--that their chosen computing platform either led the charge to ubiquitous computing or invented it outright. The claims might be true, but so far, only the standard sub-$1,000 box has found a buying public.
While the low-cost computer broke down the invisible barrier of public resistance, it also raised uncomfortable questions for manufacturers. Success for PC and chipmakers in the future may depend on the ability to sell high volumes of product at low margins. The vaunted technology gods of today could become the consumer product mills of tomorrow. How these businesses adapt is a question that may not require an immediate answer, but it is not going away.
Coming to market
For years, industry visionaries have told a future where computers would be both powerful enough for complex tasks and affordable for the vast majority
of households. This year, without much fanfare, 
that vision became a reality.
Although initially viewed with skepticism, the full-featured sub-$1,000 PC has become a defining fact of life in the high-tech industry. Systems for under $1,000 will likely wind up constituting close to 32 percent of the retail market in 1997, according to Computer Intelligence. In the beginning of the year, the segment accounted for about 9 percent of sales.
The sub-$1,000 machine of today, however, is a far different animal than those offered less than ten months ago. Then, the segment consisted of close-out computers dumped at fire-sale prices, said Jim McDonnell, worldwide marketing manager at Hewlett-Packard. Current cut-rate machines come with what was known as cutting-edge technology only months before.
HP's McDonnell explains component price slide |
"There have always been sub-$1,000 PCs. The thing that was new this year was that the sub-$1,000 PC did something useful," said Linley Gwennap, editor in chief of the Microprocessor Report. "The hardware configuration that was $2,000 a year ago is now $1,000, and we're still on Windows 95."
The results have been seismic. Computers have lurched closer to becoming a mass phenomenon. Name-brand vendors such as Compaq have seen their desktop sales grow at three times the rate of the market, partially though the popularity of
their low-cost machines. Likewise, the emphasis on cost and volume has given a jolt of energy to processor vendors such as Cyrix and Advanced Micro Devices, both of which scored deals with major
manufacturers this year to supply chips for low-cost machines.
At the same time, however, the public's love of low prices has led to a need to make up for dwindling margins with increased volume. Price wars have erupted and show no sign of abatement. Industry consolidation is seen as one of its potential, unsavory effects.
The trend's bellwether has turned out to be Intel. In October, the company announced that it would release a wide variety of chips based around the Pentium II core, including Pentium II-style chips for the sub-$1,000 and even sub-$500 segments.
