Over the recent year, there's been a lot of talk about the so-called $100 PC. Last fall, during Gartner's Symposium in Orlando, Microsoft CEO Steve Ballmer talked about why "we" need a $100 PC. In certain parts of the world -- parts that Microsoft sees as growth opportunities now that other markets are saturated -- Microsoft has been selling Windows and Office (in some cases, stripped of certain features/functions) at cut-rate prices in hopes of stimulating demand. Last month, in an interview with CNET News.com, AMD CEO Hector Ruiz claimed the $100 PC is on the way. In fact, Ruiz went as far as saying that the PC would be a laptop PC. Said Ruiz in the interview, "I don't think a $100 computer is out of the question in a three-year time frame. A lot of people forget that the first cell phones came out at $3,000 to $4,000 dollars and today are free. I think there's going to be some of that same kind of movement with computing and communications devices.....I think, within three years, it's not at all unreasonable to think of a $100 laptop for that segment." But is $100 achievable, particularly when you take the cost of a decent monitor into consideration?
This week, VIA Technologies announced that it is readying a $250 PC that will be out by Fall 2005. VIA has a reputation for being a low-cost provider of PC components and has even been on the receiving end of an Intel lawsuit after offering inexpensive substitutes for Intel's chipsets. While the $250 includes a monitor, getting the system down to that price required some compromises. &For example, the system comes with a 1 GHz processor (ancient compared to today's offerings), only 128 MB of RAM, and the preinstalled operating system and applications are installed in read-only flash (an approach to building PCs that has completely failed in almost every previous attempt). Consdiering those compromises and the fact that VIA can only get the price down to $250, it's practically impossible to imagine a $100 PC, including monitor, anytime in the near future, let alone a $100 notebook. Notebooks are invariably more expensive than their desktop counterparts.
On the heels of Ballmer's proclamation, I blogged that Sun president and COO Jonathan Schwartz's idea of a free PC might stand a better chance of entering the market than a $100 PC. The difference is that with the free PC, you'd probably get it from a service provider -- for example your ISP -- and you have to pay for the services instead. The question for service providers is: at what point will the average revenue per unit (the ARPU) make free PCs a profitable business model? The open source world has proven that the free product/paid services model can work.
At the recent Open Source Business Conference, Schwartz said the model isn't restricted to the technology business. Schwartz gave an example of where cars might one day be free, as long as the services that car manufacturers can package with them generate enough ARPU. Schwartz said that auto execs had already done the math and now, it's just a question of what services can be added on to drive up the ARPU to approximately $220 (in addition to services that are available today like GM's OnStar). More on the idea of free cars in an upcoming blog. Schwartz's position on the issue isn't surprising. The lower the ARPU break-even point, the easier a time certain service providers will have in shifting to the free hardware model. Thin clients -- computers that draw their compute and storage horsepower from the network -- represent one way to keep the hardware costs down. Between Sun's SunRay systems (designed to replace home PCs) and Java, the company has enough technologies in place to deliver an end-user experience that's as rich as that offered by the PC (for most but not all applications), one that's equally if not more secure. But, as evidenced by a starting price of $359 (without the monitor), even Sun has had difficulty in getting the acquisition cost down to a point where its thin clients can compete with stripped down PCs like the one VIA is looking to offer.