Compaq Considers Lowering PC Bar to $799, According to Exclusive Computer Retail Week Report

Compaq continues to lower the price bar on branded systems with plans to introduce a third system priced at $799, reports Computer Retail Week in an exclusive report by Editor Mark Harrington. In a story that will run in the April 28 issue and is currently posted on the publication's Web site, CRWi at http://www.crw.com/, Harrington quotes numerous industry sources who say Compaq is expected to introduce a third model in its 2000 series at an industry-low $799 as early as this summer. Harrington notes that leader Packard Bell already markets a lower-level system for $799, but Compaq's product, with a 166MHz version of Cyrix's MediaGX chip, would mark an industry low for a top-tier brand and could force second-tier makers to take drastic actions. Harrington reports that market sources say Compaq's aim is to deliver a high-level system and monitor that can be marketed for $999.

Former Compaq executive Andrew Watson, now Vice President of Marketing for startup PC maker Monorail, which already markets a one-piece P-75 system (with monitor) at $799, is also quoted in the report saying that he's heard rumblings of the $799 Compaq piece and is prepared. The report quotes Watson saying, "We will respond appropriately. We hope they'll be as on time with this one as they were with their first," he quipped. He said Monorail plans to leverage its upgradability and built-in monitor over such competitive threats. Harrington notes that, "Compaq's move promises to add considerable fuel to promotional PC fires, which are expected to be raging by the back-to-school season, market participants said. The fires are being fueled by the availability of Intel-alternative processors and an expanding low-end market segment. Both Acer and AST Computer are intimating plans for a $799 system for the back-to-school season.

"Meanwhile," writes Harrington, "Compaq next month is expected to introduce a 150MHz MediaGX-based system for $999." He quotes an executive at a tier-two vendor saying, in response to the move, "Compaq is putting a stake in the ground and trying to drive it through the heart of companies like Packard Bell."

The report notes that, at press time, a Compaq spokesman hadn't returned Computer Retail Week's phone calls seeking comment, but a source close to the company acknowledged Compaq is considering the $799 system. Following are additional quotes from industry insiders as they appear in Computer Retail Week's exclusive report:

-- Steve Tobak, Vice President of Corporate Marketing at Cyrix, said given the cost of the chip, $799 "is certainly doable," but he declined to comment on plans of Cyrix customers.

-- "They got [criticized] for offering a system without monitor at $999," said one source familiar with Compaq's plans.

-- "I don't expect any cessation of the downward pricing spiral," said Richard Zwetchkenbaum, Director of PC Hardware Program Research for International Data Corp., Framingham, Mass. "As vendors bring pricing down to $599, where I believe they'll eventually get, you will see even more consumer buying activity."

-- AST Computer, stung by recent losses and a workforce reduction, nevertheless will continue to market to the entry-level segment it helped create, said Terry Baker, AST Director of Worldwide Marketing for Consumer and Commercial Desktops and Notebooks. The $799 price point is "ideal for retail," Baker said. "Dropping the price $200 (from the current low) gives a new level of consumer a reason to buy." Based on current pricing trends, he added, "it's going to be quite a Christmas." Baker said AST will hit the $799 price level with either Intel or AMD microprocessors.

-- While systems vendors want to create new price levels, microprocessor makers appear to be clearing the way. An AMD spokesman, confirming numerous industry reports, said the notion of a $999 system based on its K6 technology "seems possible" by Q4.

-- But not all are being lulled into the below $1,000 arena. Chris Pedersen, Worldwide Brand Manager for Hewlett-Packard's Home Products Division, said HP's customer's haven't been asking for lower prices.

-- "It's sort of like a Yugo," he said, referring to the cheap, bare-bones Yugoslavian-made car. Disputing reports of $999 PCs occupying as much as 25 percent of the market while saying HP customers aren't interested in $799-$999 systems, he concluded, "Something tells me there's a disconnect here."

Computer Retail Week is one of the leading newspapers for technology retailers. Each week, it provides critical information about new alliances, technologies and products for a wide audience of computer hardware and software retailers, mass merchants, software specialty stores and other Channel members. For the past seven years, Computer Retail Week has delivered breaking news weekly, and those stories are posted on the Computer Retail Week home page.

CMP Media Inc. provides publishing, marketing and information services to the broad high-technology spectrum -- the builders, sellers and users of technology -- through print and electronic media. All of CMP's publications and online products can be accessed through the company's TechWeb® site on the World Wide Web (http://www.techweb.com/). Along with Computer Retail Week, print titles include EE Times, Computer Reseller News, InformationWeek, and WINDOWS Magazine.

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SOURCE: CMP Media Inc.

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