Compaq validates low prices

The biggest brand name in PCs is validating the latest home computing niche: the dirt-cheap market.

Compaq today announced a new low-priced Presario 2100 based on a new 133-MHz Cyrix processor for the home market.

To date, most of the inexpensive personal computers sold to the home market have been lagging-edge machines with antiquated 486 processors and yesterday's features, or simply newer stripped-down PCs. But PC industry leaders such as Compaq Computer (CPQ) intend to drive this market into new territory and, in the process, redefine home computing.

It takes an industry leader to tackle such a job and analysts say Compaq, as the largest PC vendor in the world, is one of the most capable.

"Does it matter that it's Compaq doing this? Yes; they are near to becoming the largest and most important consumer PC maker in the world," said Richard Zwetchkenbaum, an analyst at International Data Corporation.

Compaq today announced the Presario 2000 Series with models priced as low as $999 without a monitor. The novel computer design will use a new-fangled MediaGX processor from Cyrix--not the standard-issue Intel Pentium--and come in a sleek black case. The MediaGX processor combines a graphics processor with the main processor. Also included in the Presario 2000 is a 33.6-kpbs modem, 24 megabytes of memory, a 2 gigabyte hard drive, and an 8X CD-ROM drive.

But redefining the home computer means not only low prices but giving users something different, Zwetchkenbaum said. "If it's just a matter of less PC for less money, don't bother," he said.

The typical person who does not already own a PC won't necessarily be moved to buy one now because of price alone, he contends. "People who don't buy PCs don't need one...and they don't understand why they need it," he said.

The core message of what a computer does exactly in the home is "murky" for many users, compared to a TV, for example. "People buy wide-screen TVs just to see the Super Bowl," he quipped.

Zwetchkenbaum believes that the home PC will evolve into a more narrowly defined machine, driven by companies such as Compaq. "[PC manufacturers] need to target a set of needs and applications and just do a few things well," he said. "I think this market [eventually] has more to do with a $499 PC or not even a PC, necessarily," he said. Zwetchkenbaum envisions a day when a home PC is more of an appliance than computer.

But in the near term, it cannot be ignored that cheaper PCs can also drive more sales. If a PC is priced at $700 or $800 instead of the $1,500 or $2,000 tags that today's home computers carry, a family that already has one PC may be able to go out and buy a second much sooner.

Zwetchkenbaum says that often family members contend with each other for use of a single PC, leading the family to quickly consider the purchase of a second computer. But currently the relatively high price often postpones the actual purchase for a year or more, he said.

For the time being, companies such as Packard Bell NEC are taking the first steps in this market by offering mainstream PCs at very low prices.

Packard Bell in January became the first major U.S. PC company to announce a $999 system. The Packard Bell C115 includes a 120-MHz Intel Pentium processor, 16MB of memory, a large hard disk drive, a CD-ROM drive, a modem, and a monitor--all for $999.

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Who's buying this stuff?

These PC's are ridiculously underpowered and overpriced. $999 for a computer that would not even be able to run Windows XP? How can they even begin to call that dirt-cheap? You could probably find a used Pentium II or III system on ebay for far less and it would be far more powerful.