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Dell entering new dimension with $899 PC

Despite earlier reluctance to get into the budget computing market, the PC maker is planning a new line of consumer desktops tomorrow in that area.

Despite earlier reluctance to get into the budget computing market, Dell Computer will announce a new line of consumer desktops tomorrow geared for that increasingly popular segment.

The Dimension L line, which will feature Celeron processors from Intel, will constitute Dell's response to the growing demand for inexpensive computers. Basic systems will come with 400-MHz or faster processors, a color monitor, software, 32MB of memory, and standard Dell service and support.

Dimension L boxes will start at $899 and go up, depending on the configuration, said sources close to the company. Monthly financing prices will also be part of the marketing campaign. Although announced tomorrow, the systems won't be shipped until late July.

The cost of consumer computers has been dropping like prices on day-old bread for the past year, as manufacturers have battled to gain market share and consumers have foregone high-end features for low prices. Computers selling for less than $1,000 constitute more than half of the retail market, while close to 20 percent belongs to those priced under $600. Many of these systems also come with several months of free Internet service.

Prices on some of the newer budget systems, often advertised as "free PCs," have raised eyebrows and prompted executives from major manufacturers to claim that the downward spiral in prices may not be sustainable.

Dell historically has been the most reluctant participant in the budget sector. The company was alone among major computer makers in not coming out with Celeron systems at the initial launch of the chip. Since the beginning of the year, however, Dell has become more interested in the low-end of the market and the consumer space as well.

The company's greater entry into the lower price regions is also being facilitated by declines in component costs as well some in-house engineering efforts. The Dimension L systems, for instance, will feature snap-in motherboards and are relatively small, two features which will cut down on raw material expenses. In addition, the systems will come with the 810 chipset from Intel, which comes with an integrated graphics processing unit. Analysts said earlier this year that the 810 can cut $50 to $100 off of the retail price of PCs.

At $899, Dell's new systems won't be breaking any industry price barriers. $899 is a good but not an outrageous price for a desktop consumer PC at the moment, according to Stephen Baker, an analyst at PC Data. Several superstores are also offering bundles in this price range. CompUSA's $899 system comes with a 15-inch monitor and a printer, while other stores are featuring an Emachines' system with printer and monitor for $599.

As Baker noted: "$899 with a monitor--that puts them in the thick of things."

Dell also announced a new version of its OptiPlex corporate computer which is the smallest desktop the company has made for this market. The OptiPlex GX1 measures 3.6 inches high, 12.5 inches wide and 14.9 inches deep. The systems use Pentium II and III processors and can handle up to 20GB of hard disk capacity.