CompUSA joins the "free PC" subsidy craze

CompUSA will begin offering customers "free" PCs through a subsidy program, the company announced today, joining a growing number of retailers looking to recoup some of their ever-dwindling profits.

CompUSA will begin offering $400 discounts to customers who sign up for 3 years of Internet service from CompuServe for $21.95 per month. In jumping on the "free PC" bandwagon, CompUSA joins Best Buy and Circuit City, two computer retailers that launched similar programs this week.

Unlike CompUSA, Best Buy and Circuit City are offering their subsidies in the form of mail-in rebates. Some retailers prefer this method because rebates are not always redeemed. CompUSA will offer an in-store discount.

These stores are launching these programs in the hopes that the service contracts will make up for the initial losses on the hardware, analysts say. As PCs have dwindled in price over the last few years, many retailers have been hard-pressed to find a way to make money on sub-$500 computers.

On Saturday, in limited markets, CompUSA will also offer a MaxTech PC with 366-MHz Celeron processor for $400, which renders it essentially free after the discount.

"This new program represents an exciting new development for CompUSA and for our customers," said James Halpin, president of CompUSA, in a statement.

While so-called free PCs have gained a significant amount of attention from consumers, there has been somewhat of a backlash as some of these new companies have struggled with customer service and support costs.