Bargain PCs ring in holiday season

It's almost guar-an-teed.

PC manufacturers and peripherals makers, anticipating one of the worst sales years on record, have gone all out to entice consumers to buy computer equipment this holiday.

Computer makers have increased the standard configurations of new PCs with larger allotments of memory, bigger hard drives and rewritable CD or DVD drives. At the same time, they have tacked rebates onto their already aggressively priced PC bundles. Peripherals makers have gotten in on the game as well, offering bundles and rebates geared toward photography or home video.

"People who are willing to spend some money are going to buy something...and they're going to get a lot more" this year, said Steve Baker, an analyst with NPD Intelect.

To some extent, promotional fever has already had an effect. On Thursday, chipmakers Intel and Advanced Micro Devices both said that sales would likely be higher than expected for the fourth quarter.

Whether it's used to sell new operating-system upgrades or move small-business hardware, bundling is a well-documented PC industry marketing technique.

But analysts say that this holiday season is different. Because of the lower cost of components and an overall down market, manufacturers are taking bundles to new levels, creating more aggressive deals this year in an attempt to eke out better sales.

Bargains at the high end
While there are PCs being offered at familiar prices, such as $599, $999 and $1,199, this year's crop of holiday PCs are surprisingly high end, according to analysts. Many PCs feature more memory than before, starting at 256MB, with hard drives between 40GB and 80GB. Many PCs also sport both a CD-RW drive and DVD-ROM drive.

Compaq Computer's Presario 5130US is a good example. It features Intel's 1.2GHz Celeron processor and 256MB of RAM, a 40GB hard drive and CD-RW and DVD ROM drives, for $749. Compaq offers a $100 rebate on most Presario desktops when purchased with a monitor. The rebate rises to $150 when purchased with a monitor and a printer.

Hewlett-Packard recently launched the Pavilion P9995 with a 2GHz Pentium 4 chip, 512MB of RAM, an 80GB hard drive and a DVD-rewritable drive. The PC is priced at $1,999 without a monitor.

HP is also offering customers $150 rebates on most new Pavilion PCs purchased with a monitor, and an additional $50 for those who also buy a printer, a scanner or a digital camera.

Dell Computer is getting into the holiday spirit by combining free upgrades with free shipping and smaller rebates. When buying online, purchasers of certain Dimension desktops can get a $50 rebate, free shipping, and a choice of a CD-RW, a DVD-ROM or a Lexmark X73 All-In-One Print Center upgrade. Dell is also giving away a Palm m105 PDA with each refurbished Dimension it sells.

Rebates aren't only a Wintel game. Apple Computer is dropping the price on certain iMac systems, with a $150 rebate that runs through the end of December.

"It's not unusual for the fourth quarter to have aggressive promotions. However, I did really start to see it stepping up in conjunction with the Windows XP launch" in late October, said Toni Duboise, desktop PC analyst with ARS.

Sweetening the pot, retailers are adding additional $100 rebates on PCs with certain processors. These rebates come on top of manufacturer rebates, allowing many PC buyers to receive $250 or more with a bundle. Typically, manufacturers underwrite these rebates.

This week, for example, Circuit City is offering a $100 instant rebate with all of its Intel Pentium 4-based computer packages, including the PC itself, a monitor and a printer. Best Buy is offering a $100 mail-in rebate on Pentium 4 PC packages. Staples is also offering $100 off Intel Celeron-based computer bundles. Many PCs containing high-end AMD Athlon and Intel Pentium 4 processors can be found in bundles priced close to $1,000 after rebates.

"Shoppers really do need to be aware of what they want. Then they need to shop for it. Because every single week you can get an additional $100 to $150 off a machine" at a given store, Duboise said.

Beefier notebooks, smaller rebates
PC makers are also turning out notebooks with beefier configurations this season and applying similar, though smaller, rebates.

Both HP and Compaq are offering $100 rebates on their systems, while Dell offers a $50 rebate and the choice of several free upgrades, such as a CD-RW drive, on certain Inspiron notebooks.

Dell is also bringing several new components to market in its high-end Inspiron 8100 notebook, for customers who like to play games or work with multimedia on their machines. These include a faster 16x CD-RW drive, a higher resolution 14.1-inch display and a new ATI Mobility RADEON 7500 graphics card with 64MB of memory.

The new options add $100 each to the price of the notebook. A new 60GB hard drive is also available for an extra $245. (The 16x CD-RW will be an option on Inspiron 4100 and 2500 models as well.)

Not to be left behind, peripherals are also part of the bundling and rebate frenzy. HP, in one example, is offering its 318xi digital camera in a bundle with its Photosmart 1115 inkjet printer. With the company tossing in a $75 rebate, the price is just short of $325.

HP also offers a $100 rebate to customers who buy its dvd100i DVD-Writer DVD-rewritable drive, normally priced at $599, with a $299 Dazzle Digital Video Creator II video capture card.

December sales will determine, to some extent, whether such bundling and rebating practices continue or whether PC makers return to their traditional configurations, analysts say.

One thing is clear, however. If demand increases, driving up component prices, today's PC deals may vanish. ARS's Duboise says manufacturers will resist the urge to scale back PCs by moving, for example, from 256MB to 128MB of RAM. Instead, they may raise prices.

"Whether price points will remain the same remains to be seen," she said.