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Direct marketers trumpet success

Micron introduces one of the first consumer PCs with the Pentium II chip, highlighting advantages direct marketers have in getting products to users.

Micron Electronics (MUEI) introduced one of the first consumer desktop PCs with the Pentium II processor, highlighting the advantages direct marketers have in getting the latest and greatest PCs to users.

Micron and other direct marketers are the first of the major PC makers to ship 266-MHz Pentium II systems in volume directly to individual consumers. Direct marketing allows Micron to get the newest systems to individual customers typically before systems reach the retail channel in volume, according to the company.

Other direct systems vendors such as Dell (DELL) and Gateway 2000 (GATE) are currently shipping 266-MHz Pentium II systems for the high-end market.

The success of companies like Micron, Dell, and Gateway in getting systems out quickly has attracted the attention of vendors who sell through retail and reseller channels. In April, Micron stated publicly that they were an acquisition target of Compaq (CPQ), but the negotiations fizzled out and an offer was never tendered.

"Certainly Compaq is worried about the direct guys. They are coming on like gangbusters, including Dell, obviously. They have increased year on year sales faster than almost all the others," says Roger Kay, senior analyst with International Data Corp..

Compaq's interest in buying Micron, and more recently Gateway 2000, is a direct result of the success that the direct marketing strategy has had not only with consumers but also with corporations as well.

Dell, in particular, has made inroads into Compaq's stronghold of corporate desktops and PC servers with a direct-only sales strategy. The company has posted sales gains of more than 300 percent from 1995 to 1996. It also has one of the most successful Internet sites, which adds more than $1 million in sales per day to the bottom line, according to Dell.

Micron's latest model, the Millenia Xru, is aimed at "consumer power users." The system comes standard with a 266-MHz Pentium II and 32MB of memory. A Millenia Xru with a 16X CD-ROM drive, a 5GB hard disk drive, a Zip drive from Iomega, and a 17-inch monitor is priced at $2,899. A Millenia Xru with a 20X CD-ROM drive, a 4GB hard disk drive, a Zip drive, and a 19-inch monitor is priced at $3,999.

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