PC on a budget? You're in luck

How does £550 sound for a feature-packed PC? As US demand slows, computer makers next month will begin to roll out computers for penny pinchers, built around low-cost Celeron chips
Written by John G.Spooner, Contributor

A slew of new low-cost desktop PCs are set to debut in early April, with the introduction of new budget-minded chips from Advanced Micro Devices (AMD) and Intel.

AMD plans to announce a new 900MHz Duron chip on 2 April, sources familiar with the company's plans said. Intel will follow with the release of an 850MHz Celeron chip the following Monday, sources said. The chips aim to offer PC makers the ability to offer lower priced desktops that still offer a reasonable level of performance.

Representatives from Intel and AMD refused to comment on unannounced products.

The introduction of the new low-priced chips was timed to coincide with PC makers' traditional April consumer PC refresh. Retail giants Compaq Computer and Hewlett-Packard are expected to offer new Presario and Pavilion models with the chips.

However, these new models face a PC market that has slowed amid growing signs that PC makers will consolidate in the coming months.

This leaves the new low-cost PCs to compete for a smaller overall audience that, at the same time, is opting for PCs with greater features. "What has changed is where the value in the market is and who is out there buying right now," said Stephen Baker, an analyst with NPD Intelect.

Sales of low-cost PCs fell early in the year, he said. Meanwhile, the only market segment showing an increase in sales includes mid-range PCs priced between $1,000 and $1,500 (about £680 to £1,000), he said. PCs in this segment offer older Pentium III and Athlon processors, running at 900MHz or higher. At the same time, those models offer larger allotments of memory, bigger hard drives, along with CD-rewritable or DVD drives.

"In that small segment, we're seeing increases over the prior year. What that means is the people that are buying are not the entry-level people. (Buyers) want something with some features."

While overall retail PC sales declined by 26 percent in January compared with the same period last year, sales of PCs priced between $1,000 and $1,500 rose 65 percent year-over-year, according to a recent PC Data/NPD Intelect report.

Meanwhile, new low-cost PCs based on 850MHz Celeron processor, for example, are expected to come in at around $800. These PCs typically offer 64MB of RAM, 20GB or 30GB hard drives and a run-of-the-mill CD-ROM drive.

One method chipmakers can use to battle the downward trend in the low-cost PC market is to lower prices.

For its part, Intel will lower its typical asking price for a newly introduced, high-end Celeron chip. The new 850MHz Celeron chip will be priced at about $140, sources familiar with Intel's plans said. Typically, new Celeron chips come in at about $170. The extra $30 in savings could be aimed at providing PC makers with slightly higher margins, which would increase the incentive to continue offering low-cost Celeron desktops.

However, it will could still prove to be a tough sell, as PC makers focus on higher priced systems with the Pentium III and Athlon inside.

Overall, "What this tells me is that Intel needs to move more quickly to get Pentium 4 out there" and to drive down its price, Baker said.

"We really haven't seen a lot of new, interesting products in the last couple of months," he said.

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