August 5, 1997 in Nation/World

Competition In Low-Price Pc Market Is Fierce Major Manufacturers Are Racing To Put Out Cheap Versions For Families On A Budget

San Francisco Examiner
 

Many big computer manufacturers have rolled out low-priced models - priced at under $1,000 - aimed at budget-conscious households and families looking to buy a computer for children.

Though the new models don’t feature the latest chips - such as Intel’s MMX multimedia chip or its newly shipped Pentium II chip - they still run on Pentium or Pentium-quality processors. Most also feature built-in modems and Windows 95 software.

As chip prices have fallen, competition in the below-$1,000 arena has gotten fierce. In January, Packard Bell became the first to unveil its $999 C115 computer, with a 120-megahertz Pentium chip, CD-ROM, 33.6 Kbps modem and 14-inch monitor.

Compaq followed with its Presario 2100 with a 133-megahertz Cyrix processor. AST Research has also added its own model, a $997 Acer Adventure, being sold in Wal-Mart stores.

In July, Hewlett-Packard jumped into the low-end market with its Pavilion 3100. The $999 model features CD-ROM, a fax-modem and stereo speakers, but no monitor. The company said the computer will be in stores by October.

This week, Acer America plans to announce two new computers priced under $1,000. The specifications haven’t been released, but a company representative said the new Aspire models would be priced at $799 and $999 without monitors. Monitors will cost $200 more.

Why are companies rushing to sell PCs under $1,000? According to the latest Consumer Electronics Association figures, about 40 percent of America’s 100 million households own PCs. Not all are ready to upgrade. If computer-makers want to keep sales up, they know they’ll have to broaden the market to those who may not be able to afford higher-priced PCs.

“We realized there were people out there who were not yet buyers because of the price,” said Mal Ransom, senior vice president of marketing for Packard Bell NEC. Ransom said Packard Bell and others in the industry hope these first-time buyers will come back later for more expensive machines.

The big companies also are going after families who may want an inexpensive second computer for children.

Computer makers are able to sell PCs for less than $1,000 in large part because of advances in semiconductor technology and increased competition among chip-manufacturers.

“A lot of it has to do with component prices coming down,” said Kevin Hause, analyst with International Data Corp., a market research firm. “Memory prices have come down over the last few years and processor prices are coming down.”

Since Intel introduced its MMX chip earlier this year, it has slashed prices on its older chips. Many of these chips are now showing up in under$1,000 home computers, and Hause says they’ll provide more than enough power for most people.

“A computer with a 12-month-old chip is a viable alternative to something twice as expensive,” Hause said.

Some companies are fighting the move to cheaper PCs, said PC World magazine editorial director Phil Lemmons.

“A lot of companies want to keep price points between $2,000 and $2,500 to sustain their profits,” he said. “But it requires a certain level of affluence to keep the prices at five times the cost of the average TV. Not everyone can afford that.”

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