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HP rides low-cost PC wave

A second wave of low-cost PCs, this time targeted at business and built around the powerful Pentium II processor, are introduced from Hewlett-Packard.

A second wave of low-cost PCs, this time targeted at business and built around the powerful Pentium II processor, are starting to hit the market in force.

New Hewlett-Packard systems in many ways symbolize the second generation of low-cost computers, because they use the more powerful Pentium II processor and are designed for corporate America. This differs from the first wave, which was a tsunami of sub-$1,000 Pentium-class machines that crashed onto the consumer computer market over the last 12 months.

HP workstation price cuts
Model Processor Price Reduction
XA 233-MHz Pentium II $1,740 9.4
XA 300-MHz Pentium II $3,090 6.0
XU 300-MHz Pentium II $4,850 4.6
XW 266-MHz Pentium II
with graphics chip
$6,400 4.9
XW dual 300-MHz
Pentium II
with graphics chip
$13,100 11.7

Also today, HP announced price cuts to 13 percent on its Kayak line of Pentium II-based workstations, a product family that now begins at $1,740.

The new Vectra VLs, which are HP's upscale corporate computers, start at $1,260 for a system with a 233-MHz Pentium II and a 3.2GB hard drive.

These machines also come equipped with 3D processors. Although popular in gaming machines, 3D has largely been absent from corporate desktops. The drop in price of these specialty chips, however, is prompting the entry of sharp graphics into corporate desktops even though few business applications fully utilize 3D.

Other major PC manufacturers, such as Compaq and IBM, are beginning to discount existing Pentium II business models to prices below $1,500, fueling the low-cost trend.

The Vectra VLs support Intel's Accelerated Graphics Port (AGP), a technology for improved graphics performance, as well as HP's latest version of its TopTools PC management software, said Achim Kuttler, product marketing manager for the commercial desktop division at HP. Until now, only HP's Kayak workstations have supported AGP.

To be sure, low-priced corporate PCs are an inevitability. The hard drives, processors, and memory modules that go into corporate systems have suffered the same sort of price declines, which in turn has lead to lower prices on boxes. Competition has also remained notoriously tight among the major vendors.

Pentium II processor prices also continue to nose dive, opening the door for aggressive pricing of systems that only six months ago were considered high end.

And, although many observers have said that the performance demanded by corporate buyers means that corporate boxes will cost more, HP's Kuttler said that large-scale buyers can see the advantage of lower-cost machines.

"We're seeing pretty good volumes" in low-cost corporate computers, he said, and the volume is growing.

Intel is also focusing its attention on bringing down the price of business systems. Earlier this month, Intel released a "Basic PC" specification for sub-$1,000 Pentium II PCs for businesses.

Price declines will likely continue for the first half of the year, said Michael Takemura, product marketing manager for desktops for Compaq. Prices will then likely track upward with the release of the next generation of Pentium II processors, code-named Deschutes, which will run at faster speeds and, in many instances, contain a faster system bus, which increases the overall performance of a PC.

HP's price cuts on the Kayak workstation line follow last week's introduction of Intel's top-of-the-line 333-MHz Pentium II. (See related story) Workstations with 233-, 266-, and 300-MHz chips have been reduced by as much as 13 percent.

A entry-level Kayak XA with a 233-MHz Pentium II, a

New HP Vectra Models
Processor/Memory Hard Drive OS Price
Pentium II 32MB
3.2GB Win 95 $1,260
Pentium II 32MB
3.2GB Win NT $1,309
Pentium II 32MB
32MB Win NT $1,574
Pentium II 64MB
6.4GB Win NT $2,450
2.5GB hard drive, and 32MB of memory falls 9 percent to $1,740. A Kayak XU with dual 300-MHz Pentium II chips, 4.5GB of storage, and 64MB of memory drops 5 percent to $4,600.

A Kayak XW with with a single 300-MHz Pentium II, 4.5GB of storage, 128MB of memory, and a dedicated graphics chip now costs $10,200, a 13 percent decline.

Along with the new systems, HP has a new version of TopTools, its management software. Version 3.0 of the software uses a Web-based interface, said Kuttler. As a result, information system administrators at large businesses can monitor fleets of corporate computers from remote locations. On previous versions, administrators had to use a dedicated computer terminal.

Using the software, administrators can turn desktops off and on, update system features, and view hard disk capacity, among other functions. The system, like other management software from other major vendors, reduces overall computing costs by giving administrators power to control several desktops simultaneously without leaving their office.

The new Vectra VLs are the seventh generation for HP, and will replace Vectra VLs introduced last summer.