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Sub-$600 PC sales skyrocket

Sales of sub-$600 personal computers surged in February, though overall revenues for PC makers continue to fall due to shrinking price tags, according to a survey.

Brooke Crothers Former CNET contributor
Brooke Crothers writes about mobile computer systems, including laptops, tablets, smartphones: how they define the computing experience and the hardware that makes them tick. He has served as an editor at large at CNET News and a contributing reporter to The New York Times' Bits and Technology sections. His interest in things small began when living in Tokyo in a very small apartment for a very long time.
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Brooke Crothers
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Sales of sub-$600 personal computers surged in February, though overall revenues for PC makers continue to fall due to shrinking price tags, according to a survey.

Sub-$1,000 PCs continued to dominate at PC retailers, with the largest growth in the sub-$600 market, which swelled 657 percent over February 1998. Sub-$600 PC sales now represent 19.9 percent of PCs sold at retail, according to market researcher PC Data.

PC makers such as Emachines and Packard-Bell NEC are major suppliers to this market. Recently, Microworkz, a Seattle-based PC company, began marketing a PC for about $300, adding fuel to an already red-hot market.

Emachines, meanwhile, is trying to redefine the $600 PC segment by adding high-end features such as DVD drives and fast Intel processors.

PC Data said growth in the sub-$600 segment came at the expense of PCs in the $600 to $1,000 PC price range, where unit share fell 12.9 percent.

Segments of PCs above $600 fared as follows:

  • PCs falling in the $600 to $1,000 range: Unit share fell 12.9 percent, although it remained the largest portion of the retail PC market with 42 percent.

  • PCs priced between $1,000 and $1,500 accounted for 33.3 percent of sales in February, and represented a 5 percent increase over January 1999 and a 4.6 percent gain over February 1998.

  • Sales of PCs priced at more than $1,500 represented only 5 percent of total retail sales, and registered a 70 percent unit decline over February 1998.

    Overall, Compaq was the market leader in February with 30.9 percent of sales, on a unit increase of 4.3 percent. "However, Compaq's revenue fell 17 percent, as the average price of a Compaq PC dropped below $1,000 for the first time to $961," the market researcher said.

    This is a 5 percent decline from January's average price of $1,011 and a 20.8 percent fall-off from the February 1998 price of $1,212, PC Data said.

    Hewlett-Packard accounted for 28.9 percent of retail units, which represented a 25 percent increase over February 1998. Four of the top five selling PC models in February were Hewlett-Packard products.

    IBM finished in third place with a 10.7 percent share followed very closely by Emachines, with 9.9 percent. Former market leader Packard-Bell NEC's share dropped to 7.5 percent in February.

    Though lower-cost PCs bode well for consumers wanting to get more PC bang for the buck, it may be a bane for some PC makers. An ominous, though unsurprising, trend is revenue drop-off. Revenues plunged 16 percent compared to February 1998, PC Data said. Moreover, unit sales of Windows-based PCs increased less than 1 percent compared to February 1998.

    The average price for Windows-based PCs fell to $947, representing a 17 percent decline from last year, although this was a slight increase over January's average price of $944.

    Despite slow growth overall "certain companies and segments were able to exploit the changing makeup of the US retail PC market to gain increased market presence," said Stephen Baker, senior hardware analyst at PC Data in a statement.

    He cited Advanced Micro Devices (AMD) as one of the "winners" in February and Emachines, "with an impressive increase in sales, and the sub-$600 PC market, which benefited from these two companies focusing attention on that sector," he said.

    The AMD-K6 chip captured more than 50 percent of retail sales in the United States for the first time in February 1999, according to Baker. Unit sales of PCs based on AMD processors increased by more than 70 percent versus February 1998.

    PCs with AMD processors accounted for 51.4 percent of overall unit sales and 65.7 percent of the sub-$1,000 sales. Certain retailers such as CompUSA and OfficeMax carry a preponderance of computers based on AMD processors. Certain PC lines at these stores use only AMD chips.

    AMD was strongest in the $600-$1,000 market, where 73 percent of all sales were PCs based on AMD processors. AMD also accounted for 47 percent of unit sales in the sub-$600 market.

    Although Intel chips were in only 18.5 percent of sub-$1,000 PCs, it led the $1,000-$1,500 market with 65.7 percent of sales and captured nearly all sales of PCs priced above this mark, PC Data said.

    PCs based on processors from National Semiconductor's Cyrix arm declined to 10.3 percent from 15.7 percent in January, although unit growth increased more than 280 percent versus February 1998.

    PCs using AMD processor sold, on average, for $851 in February. Intel Celeron based PCs sold for $917 and Pentium II computers for $1,346. Cyrix-based PCs sold for an average of $583, according to PC Data.