Free iPaq? Compaq plays giveaway game

On Tuesday, the PC maker launched a new promotion: Buy an Evo notebook, an Evo desktop or an Armada notebook and get a Compaq iPaq 3650 handheld for free. The handheld, which has a color screen and 32MB of memory, sells for $399 on Compaq's Web site.

The offer is part of Compaq's new Business Tuesday. The program, a 72-hour promotion that changes weekly, was launched to reach out to small and medium-sized businesses.

The freebies are also part of a larger trend in which PC makers have been offering discounts, rebates and free hardware with their new PCs in an effort to woo customers in a down market.

Some of the more aggressive offers have come from Dell Computer.

Dell has paired rebates with free Palm m100 handhelds. Through the end of October, Dell is also offering to double the amount of memory for free, provide free ground shipping and give 25 percent off Dell flat-panel monitors. And last week, Dell announced a no-interest leasing deal for small businesses. Compaq has a similar no-interest program.

A number of retailers, Circuit City and Staples among them, have also gotten into the promotional game, giving away memory, software and Palm handhelds with copies of Microsoft's new Windows XP operating system.

Until now, Compaq's offers had been limited to free shipping, free memory upgrades and such.

"This is a decent offer," ARS analyst Toni Duboise said of Compaq's iPaq giveaway. "This is definitely an improvement. It's still selective, but it is more aggressive than the previous Business Tuesdays. This brings some hope that maybe they're stepping up their promotional activity."

A Compaq executive said the promotion is in response to customers.

"A number of customers have indicated that the iPaq technology was something they wanted...and (asked) could they marry it with a desktop or a laptop," said Dan Busse, Compaq's director of small and medium business marketing in North America.

At the same time, he added, "you are going to see us continuing our aggressiveness in all regards" when it comes to Business Tuesday.

Promotional offers as of late have become a necessary evil to sway customers who are on the verge of upgrading but hesitate because of the slumping economy.

For Compaq, which was hit hard in the third quarter, the promotions might also help to sway customers concerned about the company's impending merger with Hewlett-Packard.

"It's very important for them to stay aggressive," Duboise said.

And when it comes to drawing a line on promotions, which could eat into the bottom line, analysts say anything is better than ending up with excess inventory.

"I guess you could say that (a promotion) is the lesser of two evils," Duboise said. "Often when a promotion is getting popular, you can see a manufacturer limit that promotion. In order for it not to eat into their bottom line, they'll limit it to one model or one product line."

While other vendors' promotional offers typically last between five and 15 days, the more limited time of Business Tuesday "inspires people to act now," Duboise said.

The iPaq offer is available on a wide range of Compaq Armada and Evo notebooks, as well as three Evo D500 desktops. When configured with a 1GHz Intel Celeron processor, 128MB of RAM, a 20GB hard drive and a CD-ROM drive, the Evo desktop costs $758. Compaq also tosses in free shipping.