HP lowers price pole with $349 PC

Hewlett-Packard is again doing the low-price computer limbo with a new $349 desktop PC.

The computer giant on Thursday began taking customer orders for the new Pavilion a210e PC on its HPShopping Web site. The machine--the sister model of the $349 Compaq Presario S4000J--will be available only directly from HP.

The Pavilion a210e's $349 opening price undercuts HP rival Dell Computer, which offers consumer-oriented desktops starting at $399. The Pavilion a210e also competes, to a lesser extent, with budget PC seller eMachines.

"HP is trying to increase its price competitiveness against Dell," said Toni Duboise, a desktop analyst with ARS. "We can't say it's a price war yet, but there's some interesting price positioning going on here."

HP has been battling both Dell and eMachines for market share. HP was the world's largest PC seller during the fourth quarter of 2002, only to be unseated by Dell in the first quarter of 2003. eMachines has also increased its share of the U.S. retail PC market, analysts said.

Lower prices have been one trademark of the "new HP," which has dropped its PC prices since its merger with Compaq Computer in May 2002. While it's less profitable to sell lower-priced desktops, machines costing less than $800 have been showing appreciable growth of late, analysts say. The spark in consumer interest in less expensive machines has pushed average prices for desktops sold at retail in the United States down. The average has hung around the $700 to $750 mark in recent months.

The $349 tag isn't HP's lowest price ever, but it may be one of the company's most aggressive offers to date. HP sold a $319 Compaq Presario S3000V desktop last spring. But that price came after a $50 rebate, and consumers were charged for shipping. As a result, the new $349 price tag could gain PC shoppers' attention.

HP is able to offer the lower price, in part, by selling the desktop only directly from the company--a move that saves money on stocking shelves. The PC giant also used slightly older, and therefore less expensive, components and eliminated extras such as speakers.

"HP is offering a solid base configuration for the entry-level user--someone who doesn't demand much from a PC--by using somewhat dated components," Duboise said. But the company "is still offering about a $30 price-performance advantage."

The Pavilion a210e will have enough power for everyday computing tasks such as sending e-mail. The desktop is fitted with an Advanced Micro Devices Athlon XP 2000+ processor running at 1.67GHz, 128MB of RAM (random access memory), a 40GB hard drive, a CD-ROM, a modem and a keyboard and mouse. The desktop uses built-in graphics included with its Via Technologies chipset. Its base configuration does not include a monitor, nor does it have a floppy drive or speakers, which are each $20 upgrades.

In an effort to sweeten the deal, HP is offering free shipping and is including an extra 128MB of RAM for free, giving the PC a total of 256MB.

Dell's least expensive desktop, the Dimension 2350, offers a 2.2GHz Intel Celeron chip, 128MB of RAM, a 30GB hard drive, a CD-ROM, Altec Lansing speakers, a modem, and a keyboard and mouse for $399, according to the company's Home and Home Office Web site. A floppy drive is a $20 upgrade.

Dell often sets its prices slightly higher and then entices customers with special offers. The company currently is offering a free CD burner and free shipping on the Dimension 2350, according to its Web site. Shipping charges are usually about $99.

But HP still manages to come out ahead on price. Upgrading to a CD burner and adding speakers on the Pavilion a210e to match Dell's 2350 increases the Pavilion's price by $90 to $439, according to the HPShopping Web site. But to make it an even match, a shopper must upgrade the Dimension 2350 to 256MB of RAM, which increases its price by $60 to $459, according to Dell's site.

HP also offers the new Pavilion a200y, which starts at $379 with a 2.4GHz Celeron chip, 128MB of RAM, a 40GB and a CD-ROM. The machine cost $469 with a CD burner and speaker upgrade, according to HPShopping.

HP's $349 desktops beats eMachines' best price, though the Pavilion a210e doesn't compete as directly with eMachines as it does with some other recent HP models. HP's Presario S4000NX desktop family starts at $399, after rebates, and is more likely to rival eMachines models, because it can be found on store shelves.

eMachines' least expensive desktop is the $399 T2040, which comes with a 2.2GHz Intel Celeron, 128MB of RAM, a 40GB hard drive, a CD-ROM, a modem, and a keyboard and mouse. The Irvine, Calif., company may soon upgrade its desktops, however. eMachines typically launches a new model line every three months, near the beginning of every quarter.

CNET News.com's Ina Fried contributed to this report.