IBM may customize low-cost PCs

NEW YORK--IBM is set to unveil fully loaded consumer PCs, some of which include a new 300-MHz processor from Advanced Micro Devices, even as it considers building customized systems in an effort to recover from last year's late start in the market for sub-$1,000 PCs.

Tomorrow, IBM will become one of the first major vendors to ship a consumer PC with AMD's K6-2 MMX processor. The 300-MHz chip includes technology for accelerating 3D graphics.

The company will offer the Aptiva E85 with the new chip, 64MB of memory, a 6.0GB hard disk drive, and a modem for $1,099. In expanding its use of Intel clone chips, IBM has aggressively incorporated the AMD processor into its lineup as part of an effort to price low-end systems in line with competitors such as Compaq. The latter basically pioneered the sub-$1,000 market last year as it topped Packard Bell in consumer PC sales.

IBM will also offer the Aptiva E96 with 333-MHz Pentium II and 96MB of memory for $1,799.

"IBM is definitely getting more aggressive [with pricing]. They are being more realistic about where they can differentiate themselves from the competition and what segments they should participate in," said Kevin Hause, an analyst with International Data Corporation.

One advantage of using K6 chips is that IBM "probably gets a good deal" on chip pricing and can spend some more money on other system components, making the PC more attractive than Intel-based systems, Hause posited.

The company isn't ignoring the consumer-market success direct PC vendors such as Gateway are having, either.

IBM's Lisa Johnston, program manager for Aptiva marketing at IBM, told CNET NEWS.COM the company is considering rolling out a program for selling customized computers to consumers as early as this fall. Just last week Compaq announced such a program, which allows consumers to choose items such as different processor speeds, hard disk drive sizes, and memory configurations at a kiosk located in retail stores.

This kind of program is being investigated by IBM and other major vendors less for the purpose of offering customers more choices than for the purpose of controlling inventory, Hause said.

Direct vendors are doing well because they sell customized systems for less than a similarly configured PC found at retail outlets, since retailers aren't getting a cut of the profits.

But perhaps more importantly, direct vendors don't have to manage inventory levels at distributors and retailers, while conventional vendors that sell through retail stores must forecast demand for systems. Prices have to be cut on any unpopular systems that sit in dealer inventory, putting a crimp in the PC maker's financial results.

With the new Aptiva PCs, customers can dial-in through Big Blue's Global Services Internet connection for free and access information on software updates and other user information. There is also software that automatically updates drivers and other system software automatically for users after they register their systems with IBM.