AOL offers cheap PCs, attacks Dixons

Deal extended to CompuServe customers, is part of deal to increase Intel penetration in Europe

AOL is to offer UK customers inexpensive PCs, the company announced Thursday.

Under the deal UK CompuServe customers will get 25 percent or £250 off the cost of a £999 Pentium III Fujitsu Siemens PC. Alternatively a Celeron 433 PC is available for £599 with a cashback payment of £150. In return users will have to sign up to CompuServe -- with a monthly subscription of £7.50 -- for a minimum of three years.

The Fujitsu Siemens offer is one strand of a deal AOL has undertaken with Intel to increase PC penetration across Europe. AOL will get together with a variety of PC manufacturers over the winter to provide Internet-enabled machines to both first-time and experienced users.

"Our agreement with Intel will make putting a computer in your home as commonplace and as straightforward as buying a new telephone or TV," said president of AOL Europe Andreas Schmidt.

Schmidt lost no time attacking Dixons' PC prices. According to a report in the Times newspaper he described the retail giant -- which has an 80 percent share in rival free ISP Freeserve -- as a "dominating retail force".

Dixons hit back at the claims. "We offer the lowest PC prices in the UK," a Dixons spokeswoman said. "The Office of Fair Trading did a report recently and concluded that the market is competitive and consumers have a wide choice of retailers and outlets."

Nick Jones, analyst with research firm Jupiter believes the AOL offer is intended to boost the profile of CompuServe. "It is a technique AOL has tried in other markets and it is interesting they are using the CompuServe brand to deliver it. CompuServe has been on the back burner for a while," he said. Jones believes the offer will drive computer use, with CompuServe subscribers taking advantage of the chance to get a second PC for the home.

He also thinks Freeserve may hit back. "Dixons has been picking up flak for a long time for its PC prices. It is quite possible it will use the Freeserve brand to promote special offers on PCs," he said.

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