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AOL unveils a $299 PC deal

The company is offering a PC, monitor and color printer for $299 to subscribers who sign up for one year of Internet access, the latest effort to prop up its subscriber base.

America Online confirmed Thursday that it is offering a $299 bundle of PC, 17-inch monitor and color printer to subscribers who sign up for its Internet service for one year--its latest effort to prop up its subscriber base.

The Internet service provider launched a Web site, 299pcdeal.com, to promote the offer, which runs through Dec. 31.

The "new AOL Optimized PC" is built by Systemax, a Port Washington, N.Y.-based PC maker. It includes a 1.7GHz Intel Celeron processor, 256MB of RAM and a 40GB hard drive. They come preloaded with Microsoft Windows XP Home Edition and Sun Microsystem's StarOffice software.

An AOL spokesman said the offer is a test program being aimed directly at consumers who have limited or no experience using the Internet. If successful, the company will consider making similar offers in the future, he said.

The move follows AOL's announcement that it plans to launch a new discount Internet access service under its Netscape brand to combat the growing threat from both cheaper alternatives and speedier broadband offers. The stripped-down service is expected to launch in early 2004 for $9.95 a month and to offer fewer of the bells and whistles found on AOL's $23.90 a month service, according to a source close to the company.

For the past two quarters, AOL has watched the number of its core dial-up subscribers slip as members have defected to faster broadband services or to cheaper discount ISPs such as United Online 's NetZero and Juno.

In the last quarter, AOL lost 846,000 members, some of them to broadband or discount dial-up ISPs. The bulk of the lost members were people using AOL at discount prices who were no longer counted as full-paying members.

Gartner analyst Denise Garcia lauded the strategy as a way for AOL to appeal to what remains its strongest target audience, Internet neophytes, but said it was unclear whether a $300 PC would appeal to a large number of people.

"AOL has to reach out to users who aren't very Internet savvy, and this might get the attention of people considering getting online for the first time," said Garcia. "However, the larger issue is whether or not people need this kind of desktop software when they can easily go online without it."

Garcia said that AOL and rival Internet service providers such as Microsoft's MSN are struggling to figure out new ways to lure customers. The analyst expects both companies to continue to push their broadband services in order to attract more experienced consumers.

"AOL needs to stop bleeding customers and make its services more compelling for existing users," Garcia said. "It remains to be seen if enough people are still looking for the 'walled gardens' Internet model that helped AOL grow in the past."

CNET News.com's Matt Hines contributed to this report.