IBM eyes new way to sell PCs

IBM is expected to introduce a new sales scheme later this year which mirrors in some respects methods now being employed by a small group of start-up companies, said an IBM executive. These companies include Gobi, Microworkz, and DirectWeb.

Those companies sell PCs not as stand-alone boxes but as a component in a larger Internet package of technologies and services.

"You'll see us come out with a [new] business model. This is the result of an evaluation of how people will buy PCs in the future," said John McAdaragh, vice president of worldwide marketing at IBM's Aptiva consumer group.

Start-up Gobi, for example, offers a "free" PC as part of a monthly Internet service fee and Microworkz does essentially the same thing by offering an inexpensive PC with free Internet access for a year. But the common theme of these new offerings is that the PC is relegated to a supporting role as the appliance that delivers the Internet to the user. That's in sharp contrast to the feature-laden, jack-of-all-trades PCs of the past.

"One of these companies could turn out to be the next Dell--or IBM and Dell could squash these start-ups," said Schelly Olhava, an analyst at International Data Corporation. Olhava said that Gateway already offers this sales model to some extent with its YourWare lease program.

"When IBM says 'end of the PC era' it means end of the stand-alone PC era. Everything is connected now," said McAdaragh.

But whatever form it takes, IBM sees the writing on the wall. "Something is going to happen here," McAdaragh said. The consumer division has been studying this business model since 1997, he said, but could not execute it because "the minimum system was at a much higher price point." But costs have come down enough now, he added.

In the near future, IBM will also launch a low-cost Aptiva PC offered with a new a financing option, he said. McAdaragh will not technically describe it as a lease--since it is still in the planning stage--but described it as an "installment" payment option.

The computer offered with this deal would be a successor to the $599 PC IBM introduced last fall, said McAdaragh. IBM has sold out of this unit and no longer ships it.

IBM is also looking into new designs to attract consumers in the face of the success of Apple Computer's iMac. McAdaragh said IBM has done much research on the appeal of the iMac. "People want freedom of color," he said, though research has shown IBM that many don't like the limited ability to add options, he said.

IBM is also looking at ways to "give customers back as much of the desktop space as possible," he said. IBM is studying an all-in-one design that houses the computer's electronics in an LCD monitor, he said. IBM has been offering a design like this in Japan already.

"We believe [this design] would be very important for the consumer space and the small business market," he said. He pointed out that IBM already offers an Aptiva S series model that offers desktop-space-saving options. It comes with a sleek LCD monitor that can swing on a long arm, accompanying speakers, and a keyboard.

As IBM shifts to new business models it is also partially repositioning Aptiva for the small business market where traditionally IBM commercial PCs have been offered. "Aptiva is now positioned more squarely in very small business," McAdaragh said.

Also, IBM, like Dell, Gateway and others, is trying to differentiate itself with support and services. IBM says, for instance, that its "owner privilege, post-purchase" support, where it provides software updates for its computers on the Web, gets about 200,000 downloads a month.

In related news, IBM today said it would offer 22 new home entertainment titles this fall for families and children including World Book and Brain Quest.