Delta Air Lines said its new "Wired Workforce" program will provide a desktop computer complete with Net access to each employee for a maximum of $12 per month. Employees must sign a three-year Internet service provider (ISP) subscription contract to participate in the program.
PeoplePC's deal with Delta and yesterday's pact with Ford could signal a change in how PCs are sold in the consumer market.
If more companies start offering these types of programs, retailers could see computer sales fall in stores as well as through online sites. The consumer market, in some respects, may begin to resemble the corporate market, as sealing large resale deals often determines market winners and losers.
These deals, of course, also serve as an endorsement of San Francisco-based PeoplePC, one of the "free" PC start-ups that is working to separate itself from the pack.
"We know that if Delta is to maintain a leadership position, we need a work force comfortable with technology. Access to information is a business imperative we are eager to support," Leo F. Mullin, Delta chairman and chief executive, said at a presentation before several hundred employees.
The PCs in the deal will include a 500-MHz Celeron, 64MB of RAM, CD-ROM, 4.3GB hard disk drive and 15-inch monitor.
Delta and PeoplePC are still in negotiations with Compaq Computer, Hewlett-Packard, IBM and Toshiba to determine which company will provide the hardware systems.
The open market value of the computer and Internet services is around $1,600, but employee payments would only total $432 over the life of the contract, according to Delta.
Mullin said the company would start issuing computers to employees at the rate of around 5,000 to 10,000 a month, starting in July.
Like other "free" PC companies, PeoplePC functions more as a channel for ISP services and products rather than a classic manufacturer. Free-PC offered Compaq machines when it was offering its own free PC deals. Free-PC, however, like most others in this market, has stopped its promotions.
"This will be part of a new wave of employer and employee benefits," said Mark Barden, vice president of marketing for PeoplePC.
PeoplePC is hoping to make money not off the sale of computers, but from the fees it collects when users click on its partner Web sites.
In the case of Delta, for instance, employees will use a PeoplePC and Delta co-branded Web site that has special offers such as a $100 cash bonus for opening a new brokerage account with E*Trade.
"We are a buying community. We are setting up a big online Costco, if you like," Barden said. He added that the company should make money as they can negotiate large discounts on products, including PCs, by promising to deliver to lots of customers.
Yet there isn?t a guarantee that PeoplePC will be able to avoid the cost problems that Free-PC and other companies have run into. Free-PC abandoned its promotions because the base of advertising and e-commerce revenue wasn?t growing fast enough to cover the costs of the hardware subsidies. Other subsidized PC companies found themselves in a similar dilemma.
Companies are increasingly banking on these larger deals to provide extra revenue, said Roger Kay, analyst with International Data Corp.
But Kay thinks that it will be two to three years before consumers are spending enough online to make any significant impact on the revenue these companies generate.