Tech Industry

Start-up to launch $399 PC era

The firm's strategy is based on a conviction that PC home penetration is stuck because of high prices.

A start-up backed by South Korean PC giant Trigem and display maker Korean Data Systems is planning to usher in the $399 PC era next month with three ultra-low-cost systems.

The start-up's strategy is predicated on a conviction that PC penetration of the home market is now stuck at about 45 percent because of price. "$799 [PCs] have mostly served to cannibalize $1,200 [systems], not add new buyers," according to the company.

The venture, called emachines, made a splash last week when it said it would come out with an Apple iMac look-alike based on the Windows-Intel architecture next spring.

The "eTower," due next month, will be priced at $399 and come with a Cyrix processor from National Semiconductor, a 2GB hard drive, a CD-ROM drive, 3D graphics, and a 56-kbps modem. For an extra $100, a monitor is included.

emachines is now in talks with retailers such as OfficeMax, Best Buy, and retailers such as Fry's Electronics, according to sources close to the company. The company is targeting shipments in the fourth quarter of about 200,000 units.

"It's pretty striking," said Kevin Hause, senior analyst at International Data Corporation's consumer devices research group. "Retailers should go for it."

Hause added, however, that initially the company will likely have to lose money since at this price, he estimated, the units would be selling below cost. He expected the company to lose money in the fourth quarter. But by the beginning of the first quarter of next year, component costs should come down enough so the company can make money, he noted.

Next month, emachines also will come out with a $499 PC with an Intel Celeron processor and a 3GB hard drive. The company also will sell a computer with similar features with a Cyrix chip that attaches to a TV screen and features a DVD drive. This will also be priced at $499.

"We want to be perceived as the people that created the $399 price point," Steve Dukker, president and chief executive of emachines, said in a statement.

emachines is a joint venture between Trigem and Korean Data Systems. KDS bought out the assets of Radius, which had trademarked emachines, when the Macintosh clone vendor went bankrupt. Trigem recorded more than $800 million in sales in 1997, and has the largest share of the Korean PC market.

Microcenter, a computer retailer, is also offering a $399 PC--but the feature set is inferior to the emachines PC.

The PowerSpec 1810 uses a 180-MHz Cyrix processor, 24MB of memory, a 1.6GB hard drive, CD-ROM Drive, and 33.6-kbps modem.