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IBM to unveil $599 PC

Last year Big Blue was slow to introduce a sub-$1,000 PC, but now it's poised to become the first major PC vendor to break the $600 mark.

IBM, which just last year lost ground in the consumer PC market because it was slow to launch a sub-$1,000 PC, is now poised to become the first major PC vendor to break the $600 mark.

In early November, IBM will launch an Aptiva PC for $599 that comes with a chip made by IBM but based on a design from National Semiconductor's Cyrix division, according to sources close to IBM.

In 1997, IBM lost market share in the consumer space because it was offering upscale systems while the market gravitated toward the low-cost computers, a trend that began in March. IBM did not respond with machines in that price range until November, and by that time it had built up excess inventory of unwanted systems that dampened earnings.

Even without the new model, IBM's systems have been garnering more interest from retailers, writes Cameron Duncan, a research analyst with ARS in a report. CompUSA stores nearly dropped IBM products from their selection entirely, but have been offering more shelf space to the systems, he wrote. Increased shelf space is often a precursor to higher sales.

With the new system, IBM could be poised to gain market share on Compaq and Hewlett-Packard, the current PC market leaders among consumers.

IBM's use of its own chips comes at an ironic juncture because the company is currently phasing out these microprocessors. In September, National broke off a long-standing processor agreement with IBM: IBM will lose the right to make chips based around the Cyrix-National designs after the first of the year.

IBM's semiconductor division has for years sought to land its chips inside of IBM's Aptiva machines, sources have said. Big Blue's PC division, however, has largely rejected them in favor of chips from Intel, AMD, and Cyrix. Some IBM consumer PCs have used the IBM-branded chip, but typically in computers sold to overseas markets.

Nonetheless, IBM signed a technology licensing agreement with ST Microelectronics which could give IBM the opportunity to once again get back into the market for Intel clone chips. ST has its own Intel clone chip, which IBM can use under the agreement, said sources.

The processor goes by the unwieldy name of "Performance Rated MMX-Enhanced Processor." The good news for IBM is that most entry-level consumers are interested in the speed of the chip, and not the name.

IBM's forthcoming low-cost Aptiva also includes 32MB of memory, a 3.2GB hard disk drive, a CD-ROM, and a 56-kbps modem.

Separately, IBM next week will also offer a new scanner called the IdeaScan, sources said. It is a 36-bit color scanner with an optical resolution of 600-by-1200 dots per inch that will be priced at under $130.

News.com's Michael Kanellos contributed to this report.