In a market where consumers pay on average $1,200 for their PCs, the new one-gig PCs will cost as much as $4,500, according to PC makers.
"The sweet spot for price and performance is the $1,200 to $1,300 range," said PC Data analyst Stephen Baker. But top sellers cost considerably less. In January, for example, the average consumer retail system sold for $873, according to PC Data. The Reston, Va.-based market researcher does not track direct sales from Dell, Gateway and others.
These high-end systems initially may have few takers, and most PC makers know it.
Why the rush to market with systems few consumers will buy? Blame it on the ongoing speed war between chip makers. Reaching the speed threshold, long a landmark since chip power has increased exponentially in recent years, may be more than symbolic.
AMD and Intel hadn't planned to offer 1-GHz processors until summer, but in an aggressive move, Intel moved up its release plans. AMD countered by unveiling its 1-GHz Athlon processors today, two days before Intel's scheduled unveiling of the 1-GHz Pentium III.
Privately, representatives of some PC makers say they are not happy with the scenario or with the speed race between AMD and Intel that is forcing them to offer high-priced systems few consumers may be able to afford.
"I would like to see the PC vendors look out for the customers more and not get caught up in the processor wars," said a source at one computer manufacturer, who requested anonymity.
Because of their high sticker prices, all of the one-gig models initially will be built to order, meaning there will be no systems on store shelves. Dell, Gateway, HP, IBM and Micron will offer the high-end systems on their Web sites. Compaq is taking a direct Web approach but is also offering the systems through more than 9,000 in-store kiosks. Compaq may later--possibly within 90 days--offer a few limited configurations in retail stores.
Major PC makers are split into two 1-GHz camps: those exclusively supporting Athlon and those backing the Pentium III. Compaq and Gateway are betting on AMD, while Dell, Hewlett-Packard, IBM and Micron are squarely behind Intel.
"We have a long history with AMD, and we were the first PC maker to announce an Athlon system," said Mark Vena, Compaq's director of consumer desktop marketing. "It was a very easy product decision for us to embrace Athlon as the gigahertz platform of choice. The market demand for Athlon has been nothing short of phenomenal for us."
Compaq would not disclose its 1-GHz Pentium III plans, if any.
Compaq will extend its existing 5900Z Presario line to include the 1-GHz Athlon. The $2,499 model comes with the one-gig processor, 128 MB of SDRAM, a 20-GB hard drive, 40X CD-ROM drive, 17-inch monitor and JBL Pro speakers.
Compaq, like other PC makers, is positioning its one-gig system for power users and power gamers, who have flocked more to Athlon than to Pentium III, Vena said.
The Houston-based PC maker will start taking orders on Thursday and expects customers to receive the first systems within about 10 days after that. Compaq is betting AMD will be able to more quickly deliver 1-GHz processors and plans to exploit this advantage over many competitors.
"AMD has done a good job the last six months with availability when they've announced a new clock speed," Vena said. "I will let Intel speak to their availability."
Gateway is steering clear of Intel's one-gig processor for logistical reasons. None of its current systems comes with the 133-MHz system bus, relying on the slower 100-MHz bus, which the 1-GHz processor does not support.
Shortages of Intel processors also hurt Gateway's fourth-quarter results and compelled the San Diego-based PC maker to return to using AMD chips. Given the ongoing supply problems with 800-MHz Pentium III processors, Gateway "will wait awhile" before it seriously considers Intel's 1-GHz processor, said a source close to the PC manufacturer.
Besides the 1-GHz Athlon, Gateway offers the 650-, 750-, 800- and 850-MHz versions of the processor. Compaq also supports the 600-MHz Athlon, but neither company has immediate plans to support 900- and 950-MHz Athlon processors announced today.
Gateway's premium system, the Select 1000, starts around $2,999 and comes with a 1-GHz Athlon processor, 128 MB of SDRAM, 32-MB nVidia GeForce 256 graphics card, 30-GB hard drive, 8x DVD drive, 56K modem and 19-inch monitor.
PC makers in the Intel camp are taking more of a wait-and-see approach, due to ongoing supply problems.
"None of the vendors want to be in the situation they were in the fourth quarter, where there were 100,000 orders and a shortage of processors," said one PC maker source privately.
Dell, for example, is cautiously supporting the 1-GHz Pentium III, meaning it will unveil a new system, the Special Edition Dimension, but with no immediate plans to ship it.
"Dell hasn't locked into a shipping date, and we want to be fair to our customers and let them know what to expect on availability," said a spokesperson for the Round Rock, Texas-based PC maker.
The Special Edition Dimension is no lightweight PC, packing a 1-GHz Pentium III processor, 256 MB of Rambus memory, 64-MB nVidia GeForce 256 graphics card, 30-GB hard drive, 12x DVD drive, CD-RW drive and monitor. Dell will finalize pricing this week, but sources close to the company said the 1-GHz PC would sell well above $4,000.
Armonk, N.Y.-based IBM will also support Intel's fastest processor. IBM's one-gig Aptiva comes with a 1-GHz Pentium III processor, 128 MB of Rambus memory expandable to 512 MB, nVidia GeForce graphics card, 40-GB hard drive, 8X DVD drive, CD-RW drive, 56k modem and network card. The dark, or "stealth," gray-colored PC sells for $2,999 without a monitor; a T55D flat-panel monitor would add nearly $1,000 to the price.
HP and Micron also plan to release 1-GHz Pentium III models, with the HP Pavilion PC packing extras like Rambus memory and a CD-RW drive and selling well above $3,000.
Compaq will downplay extras, like DVD and CD-RW drives, focusing on the components high-powered gamers crave and trying to sell more PCs for less than competitors. A stripped-down 1-GHz Presario 5900Z model, for example, would cost as little as $2,199, half the price of Dell's high-powered model.
"If you sell a PC over $2,000 in the consumer space, you're doing pretty well given where the price points have tended to be," Compaq's Vena said.