January 12, 1998
Low cost PCs will shake up IT market
By Bob O'Donnell
If there was ever any doubt whether competition in the computer industry was a good
thing, those doubts were smashed last week with a series of introductions in the red-hot,
low-cost PC arena. Both HP and Compaq fired their latest volleys in the battle of market
share and mind share taking place in the sub-$1,000 PC market.
The story of the low-cost PC market actually begins last summer, when Compaq introduced
the Presario 2100 -- its first machine based on a non-Intel processor (it used the Cyrix
MediaGX) and its first machine with a list price of less than $1,000. The phenomenal
success of that system and its successors set the industry on a crash course with
value-oriented computers. In fact, according to industry reports I've seen, sub-$1,000
computers accounted for as much as 40 percent of retail sales over the last few months.
Given that this category basically didn't even exist just 6 to 8 months ago, that's fairly
staggering.
It's even more impressive when you consider that some of the first sub-$1,000 systems
weren't exactly barn-burners in terms of performance. The latest introductions, however,
should change that. HP's Pavillion 3260
and Compaq's Presario
2240 both offer what, at first glance, appears to be very impressive features for the
impressively low price of $799 (without monitor, of course).
The HP system features a 200 MHz Intel Pentium MMX processor, 32 MB of RAM, a 2.1 GB
drive, 56K modem, and 16X CD-ROM, while the Compaq machine uses a 200MHz AMD-K6 (which
supports MMX), 32MB of SDRAM, 2.1GB hard drive, 56K modem, 20X Max CD-ROM, and 3D
accelerated graphics. In short, they're more powerful than probably 90 percent of the
desktop systems currently installed in both large and small companies throughout the
country. Even better, they both include room for expansion: the HP has one open drive bay
and one open slot, while the Compaq has one open drive bay and two open slots. This is
another critical improvement over some of the first-generation sub-$1,000 machines, which
offered little or no upgradability whatsoever.
The fact they are upgradable also makes these machines, which were clearly designed for
the home market, viable alternatives for the corporate world. All they need is a network
card and the standard suite of business software (which many companies have licensed and
paid for separately anyway), and they're ready to roll.
These products are having a couple of interesting effects on the computer market
overall. First, the notion of the low-cost network computer gets increasingly less
appealing if you can buy a fully equipped PC for just about the same price as the limited
functionality NC. Given the momentum in the PC market, it won't be long before PCs are
even cheaper than NCs were ever forecasted to be.
Then there is the "commoditization" of the processor -- loosening Intel's
control of the market. Over the last few years virtually all the PC's other components
have turned into commodity items that could be bought and sourced from any number of
easily replaceable vendors, but Intel's microprocessors were the one component that
maintained value and uniqueness in and of itself. That is, until recently. The phenomenal
success of low-cost PCs that use non-Intel processors, however, shows that even despite
its enormous marketing campaign, Intel processors have begun to lose a little of their
luster. Many people are clearly more concerned with the overall cost of a computer system
than what processor is inside it.
Of course, Intel isn't exactly sitting around. Its partnership with HP to produce
low-cost, Intel-based computers is the first step, and the rumored introduction of a
low-cost, "cache-less" Pentium II processor this summer will be another
important effort in maintaining its dominant position in the industry. Still, the
competition provided by Cyrix and AMD, in particular, is clearly affecting users in a very
positive way. Now, if we could just find a company to do battle with a certain entity up
in the Seattle area ....
Copyright 1998, by InfoWorld Publishing Corp., a subsidiary of IDG Communications,
Inc. Reprinted from InfoWorld, 155 Bovet Road, San
Mateo, CA 94402. Further reproduction is prohibited.
