Compaq rolls out $699 PC

Compaq Computer released a $699 Internet PC today as the company strives to drive down prices still further and compete with Apple Computer's Internet-centric iMac and consumer PCs from Hewlett-Packard.

The $699 price tag comes only after a $100 rebate, according to the company. But given Compaq's position as the No. 1 personal computer maker, the price is likely to become a new benchmark for top-tier manufacturers.

The system is billed as the newest "Presario Internet PC" and comes with an M II processor from National Semiconductor's Cyrix division, 64MB of memory, CD-ROM drive, a 4GB hard drive, and 56-kbps modem.

The Presario 2266 also offers room to expand, a new twist on the low-cost PC design from Compaq. To date, most of Compaq's lowest cost designs did not offer the capability to add components.

The system has room for add-in circuit boards, extra hard drives, and ZIP or Superdisk drives, the company said.

Compaq also cuts notebook prices
Model	Old Price	New Price	Percent Reduction
Armada 1598DMT	$2,499	$2,299	8%
Armada 1700 /PII 233 /TFT with Win95 or 98	$2,499	$2,299	8%
Armada 1700 /PII 233 /TFT	$2,999	$2,799	6.7%
Armada 1700 /PII 300 /TFT	$3,799	$3,499	7.9%
Source: Compaq

It also comes equipped with a standard floppy drive--in contrast to Apple's iMac, which lacks that feature.

But there's a small catch on the low price--and buyers should read the fine print on the rebate as it is valid only by signing on to a Compaq service trial: The "$100 mail-in rebate offer valid with activation of 50-hour free trial of Compaq Easy Internet Access from Compaq Internet Setup," according to the company.

"It's a service market going forward," said Scott Miller, a consumer PC analyst at Dataquest. "You get the rebate with the Internet service, and Compaq has a revenue stream associated with the Internet service, from the ad revenue and electronic commerce. The PC ends up being an entry point."

"It's a little too early to tell, but I believe it will be a winning strategy," Miller added.

Compaq has seen its market share erode slightly in the consumer space. Hewlett-Packard and Apple had the best-selling PCs in the consumer market in August, according to PC data.

Based on a survey of catalog and retail sales operations, PC Data said the HP 6330 represented 8.6 percent of all systems sold, while the iMac rang in with 7.1 percent of sales. The showing was good because the iMac was only available for sale 17 days in August.

"The iMac has opened up a couple of issues around the Apple ease-of-use, and ease-of-getting on the Internet," Miller said. "If you believe the early indications that the iMac is selling well with first-time buyers, Compaq is competing for those dollars."

Although Compaq still leads in the consumer market with 30.9 percent of systems sold in August, Apple advanced to the third spot with 13.5 percent market share, up from 6 percent the month before. HP was second with 23.2 percent, and IBM was fourth with 10.5 percent.

News.com's Stephanie Miles contributed to this report.