The online-only iDot began has begun marketing a desktop model featuring an IBM-made, 16.8GB hard drive, 128MB of memory, and a 400-MHz Pentium II processor for $2,099. Typically, PCs in this price range come with no more than half that amount of memory and hard-drive capacity.
But Dell isn't far behind. The direct-sales leader is offering a Dimension model that can be configured with the same drive and memory for $2,197.
Meanwhile, Compaq is selling a Presario with a 400-MHz Pentium II processor, 128MB of memory, a DVD-ROM drive, a 56-kbps modem, an 8GB hard drive, and a 100MB Iomega Zip drive for $2,299 at retailers such as CompUSA.
Such competition can be daunting, but the newest direct PC seller on the block is not exactly flying blind. iDot was founded on $3.5 million in seed money from Mag Technology, a well-established CRT monitor and peripherals manufacturer.
iDot's management team also has a distinct direct sales pedigree. Executives hail from Dell, Power Computing, early direct sales leader CompuAdd (now defunct as a direct sales PC vendor), and Motorola.
The basis for iDot's business plan bloomed during a conversation among several future company executives at a coffee shop down the street from Dell, according to Mark Marlow, vice president of product marketing for iDot. "We conceptualized a company that would be able to beat the major direct marketers at their own game," he said.
Marlow says that the cost benefits of direct sales and e-commerce underpins iDot's aggressive pricing. Because of the company's business model, "Even if gross margins erode to the sub-10 percent level, we can still be profitable," Marlow said.
"Positioning-wise, we're not trying to be the next Dell or Gateway," Marlow continued. "We're looking to be something new. We're designed exclusively to do business over the Internet."
iDot.com is also introducing two other 400-MHz Pentium II computers. Targeted at small and home office users, the Entrepreneur System also features a 16.8 GB hard drive but comes with a 64MB of memory, and a 17-inch monitor for $2,398.
The Enthusiast System comes with a 10.1GB hard drive, 128MB of memory, and a 19-inch monitor for $2,598.
Separately, in a bargain-basement Internet deal, Micro Warehouse is offering a Digital Equipment desktop featuring a 233-MHz Pentium II processor, 32MB of memory, and 3.2GB hard drive for $799. The system is one of the first Pentium II PCs for under $800, although it has no doubt been discounted because the Digital line will be discounted following the company's acquisition by Compaq.