Smaller Bundles Computer Makers Trim Software Sold With Pcs

Personal computer shoppers can expect to get fewer programs with new PCs this fall as computer makers zero in on software as a way to cut costs, figuring a lot of the software isn’t used anyway.

Software companies that rely on selling their programs pre-installed, or bundled, with new PCs have the most at risk in the shift.

But it is a sign of the broader effect of lower prices for computers, forcing manufacturers to address costs that haven’t dropped, according to executives gathered at PC Expo, a trade show that began Tuesday.

The most vocal company about the change is Compaq Computer Corp., which was No. 2 in domestic retail sales last year. The company had packaged about 30 software titles in its machines last year but will have less than 20 this fall.

Executives of Packard Bell Electronics Inc., the leading seller of PCs to consumers, Acer America Inc. and NEC Corp. also said they would cut back their software bundles this fall.

For the past three years, PC makers have increasingly installed more software on machines sold in stores. At first they were trying to attract new PC owners, hoping that a wide variety of software would demonstrate the multiple uses of a computer. In some cases, 60 separate programs would come with a machine, adding $200 or so to a manufacturer’s production cost.

“The bundling craze was a reaction to the need to target those first-time buyers,” said Gene Longo, an Apple Computer Inc. manager. “Now we’re seeing the market mature a little bit, where there are less first-time buyers.”

In addition, PC makers found through customer surveys that most people would typically use less than 10 of the pre-installed programs.

Computer makers said they would still pre-install a representative sample of software. They also said they would place more emphasis on Internet-related software, aiming to make it simpler to go on line.

Analyst Jeff Tarter, publisher of the industry newsletter Softletter, said the change is part of a historic pattern in PCs.

“Everytime there’s a new platform, a big advance in processing chip or a major operating system upgrade, everybody adds tons of software to create a premium machine,” Tarter said. “Then the business goes into a commodity, price-driven phase and the hardware companies squeeze every dime of cost out of the machine.”

The average selling price of a consumer-targeted PC is expected to fall sharply this year, after rising in 1995. That’s because costs of several key components, most noticeably CD-ROM drives and memory chips, have dropped.

As PC makers pass the lower costs onto consumers, that will also put pressure on their profit margins. One way to ease that pressure is to excise costs like pre-installed software.

“For the amount of money they pay for each one of these software products, their margins are so tight it’s almost impossible for them to continue bundling in the same manner as they have in the past,” said Sam Poole, president of Maxis Inc., maker of SimCity and related simulation games.