HP aims DVD-burning PCs at mainstream

Hewlett-Packard is looking to repeat its early successes with CD rewritables in the market for consumer computers equipped with DVD-recording drives.

In late 1999, the Palo Alto, Calif.-based company jumped on the CD-RW bandwagon ahead of competitors, quickly making the technology standard equipment on all consumer PCs. On Thursday, HP launched its first DVD-burning notebook, the Pavilion ze5300, and a low-cost DVD-recording desktop.

Pricing for computers--$899 for the desktop and $1,723 for the notebook--marks HP's attempt to take the DVD-recording technology mainstream, NPDTechworld analyst Stephen Baker said.

Apple Computer--the early leader offering DVD burners--Dell Computer, Gateway, Sony and Toshiba are among the computer manufacturers providing the technology on desktops or laptops. Some of those companies, too, are pushing hard on the pricing front.

"Obviously, among the PC companies, HP, and in some respects Sony, has the most vested interest in moving DVD recording into the mainstream," Baker said. "They're already building awareness in the aftermarket with add-on drives, and they're looking to extend that to the desktops and notebooks."

An HP Pavilion ze5300 series notebook configured with a 2.6GHz Pentium 4 processor, 15-inch SXGA+ display, 512MB double-data rate (DDR) SDRAM, a 40GB hard drive, a DVD+R/RW drive, 802.11b wireless networking and Windows XP Home is $1,723 after a $100 mail-in rebate. Dropping to a 2.4GHz processor and a 30GB hard drive would reduce the price to $1,574 after the rebate, which is in the range of some desktop PCs equipped with DVD-recording drives. The computers can be ordered online immediately.

"That's an incredible price point for a DVD-recording notebook," ARS analyst Toni Duboise said. "If you look at the price points they're offering, they're definitely undercutting the competition. This is definitely very aggressive pricing on the part of HP."

"Wow," said Baker about the pricing of the ze5300.

"This shouldn't surprise anybody," he continued. "We're already seeing DVD-recoding drives in the aftermarket for under $200. The cost differential between CD-RW drives and DVD drives is close enough so that we're at the tipping point of the newer technology replacing the older technology."

The price is right Duboise noted that HP had priced the ze5300 at the sweet spot of the retail notebook market--between $1,500 and $1,999. Around 31 percent of portables sold at retail in March were priced in this range, according to ARS.

Sony's Vaio PCG-GRZ660 DVD-burning notebook sells for $1,899, but with a slower 2.4GHz Pentium 4 processor and no wireless networking. Most other notebooks with DVD-burning drives sell for $2,000 or more, according to ARS.

One of the biggest consumer areas of DVD-recording interest is notebooks. It's also an important area for HP, which sells DVD burners for desktops but has nothing comparable to add to existing notebooks sold at retail.

In February, 2.75 percent of notebooks sold at retail packed DVD-recording drives, up from none in November, according to NPDTechworld.

"It looks like DVD recording is making a faster transition to notebooks than did CD rewritable," Baker said. "The operative opportunity for HP, now that the DVD+RW drives are ready, is to step on the gas there. DVD recording has been the one major feature on desktops not available on notebooks."

Still, HP is latecomer to the portable DVD-recording market because the company chose to standardize on the DVD+R/RW recording format. Apple, Sony and Toshiba, which use the competing DVD-R/RW format, were able to start selling DVD-recording notebooks in time for the 2002 end-of-the-year buying season. Now, as the first DVD+R/RW drives reach the market, supply for them is tight.

For this reason, the ze5300 model featuring the DVD burner won't show up at retail stores until some time in early June, said Jonathan Kaye, manager of product marketing for Pavilion notebooks at HP. Large supplies of the DVD drives might not be available until August or September, he warned. In the meantime, consumers can buy a build-to-order model directly from HP, where the DVD+R/RW drive is a $225 option.

Desktop matters
The Pavilion ze5300's pricing brings portable DVD burning down into the range of desktop PCs equipped with the technology, Baker said. During the week of March 16, for example, nearly all DVD-recording PCs available at retail sold in the $1,300 to $1,700, according to NPDTechworld. There was one exception: HP's Pavilion 743n, which sold for an average $973.

The replacement model for that product, the Pavilion 735n desktop PC, is expected to reach retail stores on around April 13. It is HP's first DVD-recording model to list below $1,000. The $899 computer will come with a 2.13GHz Athlon XP 2600+ processor, 512MB DDR SDRAM, a 80GB hard drive, a DVD+R/RW drive, a 48X CD-ROM drive, a Nvidia GeForce4 MX graphics accelerator and Windows XP Home.

"Sony was first to ferret out interest in that market, Duboise said. "Sony had a desktop with a DVD recording for $799, but it didn't sell well."

Sony is replacing that with the Vaio PCV-RS220 desktop, which will sell for $100 more than HP's 735n, but with a higher clock-speed processor and a 120GB hard drive.

"HP is presenting a great configuration and price for that market," Duboise said. "Sony's RS100 was a home run, but HP's model is going to hit further out of the park, I think."

During February, 19.2 percent of PCs sold at retail came with DVD-recording drives, and the pace is accelerating, according to NPDTechworld. In December, the figure was 12.3 percent and in February 2002 it was 2.25 percent.

"We're really trying to target the consumer, home-office user that's going to use (the technology) for productivity--at a small business for example--and for personal use, such as DVD home video and school projects for the kids," HP's Kaye said.

DVD discs, which can store up to 4.7GB of data, offer much higher capacity than CDs, which store about 650MB. The extra capacity makes them more ideal for movies and other multimedia. HP and other manufacturers believe the time is right for DVD recording to take off. Retail sales figures indicate growing interest in the technology.