HP does low-price PC limbo

Throwing down the gauntlet to its rivals, Hewlett-Packard introduces build-to-order desktops that lower the price bar to $319 (with rebate, without monitor) for entry-level PCs.

Lowering the bar on the price of an entry-level PC, Hewlett-Packard on Tuesday introduced a line of build-to-order models that start at just $319 after a $50 rebate. For that price, customers get a Compaq Presario S3000V desktop computer that includes a 2GHz Intel Celeron chip, 128MB of memory, a 40GB hard drive and a CD-ROM drive. What they don't get is a monitor, which is sold separately. Shipping is also extra, with HP typically charging around $99 to ship a PC and monitor.

"That's really the most aggressive thing I've seen," said IDC analyst Roger Kay. "That's a lean, mean price."

Other computer makers have been somewhat less aggressive on price. Gateway, for example, has moved to a pricing structure that includes monitor and shipping, with more powerful machines starting at $799. A Gateway machine for small businesses is listed at $599 without a monitor. Dell Computer has a model featured on its site for $599 including a 17-inch monitor, a free CD burner and free shipping.

The pricing is most likely to put the squeeze on low-cost specialist eMachines, which enjoyed strong sales growth at the end of last year, Kay said. eMachines' lowest-priced desktop model, the T2240, sells for $399 plus tax and shipping and does not include a monitor.

HP's new model appears to be the lowest-priced Windows-based machine on the market, although still cheaper models running Linux are sold at Sam's Club, the members-only branch of retail giant Wal-Mart.

HP has been more aggressive of late on price with its suppliers in an effort to drive down costs.

"I think this is probably a reflection of those type of activities," Kay said,

HP may also be banking on the fact that the new product is a configure-to-order model, meaning many customers will choose to add on other features that will boost the average selling price of the machines somewhere in the $500 range, Kay said.

But even the base model is enough for many users, he added.

"I think that's an attractive offer, it may even bring some consumers in out of season," Kay said.