October 20, 1998 1:55 PM PDT

HP angles for No. 1 at home

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Hewlett-Packard released three new consumer PCs today in its bid to overthrow Compaq as the king of the retail PC market.

The new arrivals include a 333-MHz Intel Celeron system for $899 and another based on a yet-to-be released 366-MHz K6-2, according to HP.

Strong holiday season sales could vault HP into a position to drive past Compaq, the current leader of the home PC market. Year-to-date numbers from Audits & Surveys Worldwide and PC Data, among others, place HP as the No. 2 vendor in the home market, which is primarily characterized by sales through retail stores and consumer electronics superstores.

Some analysts are now quietly predicting HP could overthrow Compaq as the leader in the retail market by year's end. Although HP has a smaller market share, its sales are growing at double the rate of Compaq's. It was just July 1997 when Compaq took over the No. 1 retail spot from then-leader Packard Bell, according to results from PC Data.

HP also had the top-selling computer for the month of August, a unit with Advanced Micro Device's K6-2 at 300 MHz that outsold Apple's iMac for the month.

"In terms of consumer awareness, HP has a good name. [That,] combined with the right configurations and price points [means] HP is starting to entice consumers more and more," said Cameron Duncan, an analyst with research firm ARS.

HP said it is now offering the Pavilion 6355, which features a 333-MHz Celeron processor and 64MB of memory, for $899, along with the Pavilion 6360, which has a 366-MHz K6-2. A system with a 350-MHz Pentium II, 100-MHz system bus, and 96MB of memory is priced at $1,299.

Compaq, meanwhile, will counter with 400-MHz K6-2 systems later this fall.

One of the factors that has led to HP's tremendous growth in the consumer market is its ability to extend the popularity of its printer products by bundling them with its own system, analysts say.

"For their entry-level systems, consumers may have the perception that HP products work better with other HP products," Duncan noted. Compaq did not have its own branded printer line until May.

HP will continue to press on with its bundling deals with a mail-in rebate program that will offer a total of $150 back when consumers purchase a PC, monitor, and printer from HP, according to ARS.

Another factor in the company's success: HP has ridden the crest of market acceptance for AMD's processors. HP's research has shown consumers are buying processors by their clock-speed rating, and not by brand, a company spokesperson said.

AMD chips cost about 25 percent less than Intel chips running at the same speed. Consequently, HP has been able to offer faster systems with AMD chips at prices comparable to Intel-based consumer models.

"AMD products are bringing lot of value to table for them, and they are exploiting those real well," said Steve Baker, senior hardware analyst for PC Data. "While people tend to think of HP as higher-priced item, their average selling prices have been at or below that of Compaq in the last 8 to 10 months," he noted. Compaq has also adopted the AMD processors, but, as Baker points out, HP is eking out an edge in pricing.

HP's sales are up 99 percent year-to-date compared to the same period last year, while Compaq is up 47.4 percent, according to Baker. Compaq still has the overall lead with 29 percent market share, and HP is second with 18.4 percent. PC Data measures sales at catalog and retail sales operations.

HP's lowest price offering is still the Pavilion 6330, an AMD-based offering costing $799, with the Celeron-based 6355 filling in the spot above that, and two more AMD-based systems above that. The Pavilion 6360 represents a slight upward trend in pricing for an AMD product which Duncan expects will continue as AMD continues to ramp up processor speeds in the coming months.

The 6360 with its 366-MHz K6-2, the fastest AMD chip to date, is a chip not even yet announced. As previously reported, AMD will soon start offering a 380- and 400-MHz chip to place it squarely in competition with Intel's Pentium II chips.

Compaq, in fact, is expected to be among the first to use those faster chips. In early November, industry sources say the company will roll out a new Presario for consumers with the 400-MHz AMD K6-2 processor, 128MB of memory, and a DVD-ROM drive at a price of between $1,649 and $1,699, although that could change by introduction.

Intel is an investor in CNET: The Computer Network, publisher of News.com.

 

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