Compaq launches consumer PC campaign

Compaq today launched a multifront consumer PC campaign, announcing low-cost Internet PCs, a retail build-to-order program, and new notebook computers on the heels of gains in its market share.

The announcements signal a new consumer strategy centered around consumers' growing dependence on the Internet, according to Mike Rubin, director of Presario consumer PCs.

"For consumers today, the No. 1 use for the PC in the home is the Internet," Rubin claimed.

The new Presario Internet PCs come equipped with "Web friendly" features such as a high-speed modem and sometimes built-in technology to connect to the Internet using a cable modem. Cable modems deliver connection speeds many times that of even the fastest dial-up modems.

Compaq's consumer PC marketing

Rolled out the Built for You program, which allows buyers to custom configure PCs at kiosks in select retail locations. Introduced Internet PCs with bundled Internet service and a special keyboard for easy Web and email access. Five new consumer notebooks also released. Announced multiyear deals with GTE and AOL to be the preferred Internet service providers for all Compaq Presario systems. Unveiled new desktop and portable PCs and service programs for the education market.

The new systems come with Compaq's Easy Access Internet Keyboard, which offers connection to the Internet through America Online, Yahoo, or the cobranded GTE-Compaq Internet connection service.

The Internet-ready Presarios start at $799, the lowest Compaq price point to date. The Presario 2254 features a 266-MHz AMD K6 processor, a 4GB hard drive, and a CD-ROM.

"For very low prices, consumers are still continuing to get a product that is basically at the current level of technology, and is robust enough to run any [software] that's available," said Stephen Baker, senior hardware analyst at market research firm PC Data.

In response to the success direct vendor Gateway--and to a lesser extent Dell--have had in selling PCs to the consumer market, Compaq is rolling out a program that will offer custom configured PCs and notebooks to consumers.

The program, called "Built for You," allows customers to choose from different processor speeds, hard disk drive sizes, memory configurations, peripherals and (in the case of notebooks) screen size, at a kiosk located in retail stores such as Best Buy, Staples, and Nebraska Mega Mart.

The customer can order the system, pay the retailer, and either have the system delivered to his home or to the store. Presario 5600 desktop PCs and Presario 1600 notebooks are the only systems that can be customized.

"This lets the consumer go into the high-touch world of retail, see if they like it...configure it the way they want it and have it delivered to them. We believe it is the future of selling computers," said Compaq's Rubin.

For Compaq, the benefits could include increased cost efficiencies from maintaining lower inventory levels at retailers, but it could be some time before these results translate into more profitable PCs.

But some analysts aren't so sure a hybrid retail-direct sales will be attractive to a large number of customers. For one, most of the systems are at the high end where sales haven't been as robust, analysts say. Also, customer purchase patterns in stores may not mesh well with the build-to-order model.

"The essence of retail is that people go in to buy something and take it home, so in some respects the jury is out," on the effectiveness of Compaq's program, said PC Data's Baker.

The program will be available in 100 retail locations initially, with plans to offer the service in 4,000 locations nationwide by the end of the year, Compaq said.

Also today, Compaq introduced Presario 5000 series minitowers, ranging from $1,499 to $1,999. These models come with either a 300-MHz Pentium II or Celeron processor from Intel. The 5100 series with a 400-MHz Pentium II processor starts at $2,199, and features a second-generation DVD-ROM drive.

The 5600 series will feature a Digital Creativity Imaging Center, with front-panel access to plug-and-play USB connectors--a departure from standard designs which put these in the back of the PC?as well as IEEE 1394 connection ports. Connection technology based on the 1394 standard is designed to handle consumer electronics products such as digital cameras and digital VCRs.

Additionally, Compaq announced a new digital flat-panel LCD display for under $1,000. Many Presarios already come with flat panel ports that can connect to these displays, Rubin said.

Baker thinks the flat panel monitor will be one of the popular options. "Flat panels are really starting to make their mark. I think you are going to see more and more [offered]. They will be very hot items for the holiday season."

Amid gains in its notebook share reported by market research firm International Data Corporation, Compaq announced new additions to its Presario line of notebook computers.

Compaq took the lead in the U.S. notebook market, according to IDC, for the first quarter of 1998, with 17 percent market share. Worldwide, the PC maker is No. 2, behind Toshiba, with 12 percent of the market.

As previously reported by NEWS.COM, Compaq today announced the Presario 1230 notebook, based on the 233-MHz MediaGX processor from Cyrix. The 1230 also features a 56-kbps modem and Internet access through a specially programmed keyboard button for $1,699.

The Presario 1600 series features either a 266-MHz Pentium II or 266-MHz AMD-K6 processor and starts starting at $2,199.

For the education market, Compaq introduced the Presario 4240ES and the Presario 5034ES. For $1,899, the 4240ES comes with a 333-MHz Pentium II, 48MB of memory, and a DVD-ROM drive.

The $1,599 5034ES offers a 300-MHz Pentium II, and a CD-ROM as well as a USB connection.