HP Hopes to Gain Ground With Cheap PCs

Hewlett-Packard wants to be known as the PC maker with the lowest prices.

Although it faces fierce competition from Dell Inc. and Gateway Inc., which are also known for selling inexpensive PCs, Hewlett-Packard Co. says it can do better.

The Palo Alto, Calif., computer giant, which has battled with Dell for the rank of worlds largest PC maker in the past, is taking another run at its competitors with a new line of desktops, including an inexpensive dual-core processor machine, all aimed at holiday PC buyers. Meanwhile, it has been offering its HP Pavilion desktops direct to customers for just under $250, after rebates—whereas its retail and small and medium business desktops are typically closer to $350 to $400—prompting HP to believe that, on any given day, it can match or beat rivals such as Dell on prices for PCs that most consumers want.

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"We believe our prices are extremely competitive. We think if customers will really compare, well be competitive with Dell day-in and day-out," said Sam Szteinbaum, general manager of HPs North America Consumer Business in an interview with Ziff Davis Internet News. Although it "varies day-to-day and week-to-week, our goal is to be within 3 (percent) to 5 percent below what ever their offers are."

Despite at least some concerns about energy prices and potential to affect consumer spending—not to mention purchasing by small and medium businesses—HP has been offering, via its HPShopping.com commerce Web site, two rock-bottom priced Pavilion desktops, which start at $249 after rebates. One comes with an Intel Corp. Celeron processor and the other offers Advanced Micro Devices Inc.s Sempron chip. Its Pavilion a1100e, for example, offers a 1.8GHz Sempron 3000+ processor, 512MB of RAM—which includes a standard 256MB allotment with a free 256MB upgrade—along with a 40GB hard drive and a CD-ROM drive. The Pavilion a1100y, also $249 after rebates, comes with the same basic configuration, including the RAM upgrade, and Intels 2.8GHz Celeron D 336.

Click here to read more about the affect rising energy prices on the PC market.

The machines lack extras, such as speakers, memory card readers and floppy drives and they do not come with monitors or free shipping—ground shipping charges start at $99 for a desktop from HP—but, if nothing else, theyre likely to catch buyers eyes and raise interest in HPs other PCs, Szteinbaum said.

Dell, on the other hand, has said it focused too intently on low-priced systems during its second quarter, which ended in August. It doesnt appear to be pushing sub-$300 desktops as aggressively, now and has been pursuing the high-end of the market with its new XPS brand for performance machines. Still, an informal survey by Ziff Davis Internet on Wednesday sighted Dells least expensive desktop, the Dimension 2400, for $349 before shipping charges on its Home and Home Office Web site. Dell is offering the desktop with a 2.4GHz Intel Celeron processor, 256MB of RAM, an 80GB hard drive and a CD-burner. When upgrading the Pavilion a1100y to match the Dell machine, it comes to $319, after rebates and before shipping, giving HP the upper hand.

But price competition between the two gets closer at the $500 to $700 level, where many consumers and small businesses purchase desktops.

Dells Dimension 3000 desktop starts at $549 without a monitor and for $599 can be purchased with a 15-inch flat panel display, thanks to a special upgrade offer. The machine comes fitted with a 2.8GHz Pentium 4 processor, 256MB of RAM, a CD-burner and an 80GB hard drive. The Round Rock, Texas, PC maker uses a revolving set of rebates, including component upgrades and free shipping offers, in order to encourage sales.

HPs Pavilion a1110y, when configured with hardware and a flat panel monitor that matches the Dimension 3000, also costs $599 after rebates and before shipping. HP ups the ante by including a slightly faster Pentium 4 516 processor, running at 2.93GHz, and an extra helping of RAM with the machine, thanks to a special upgrade offer.

Click here to read more about the Pentium 4 516.

However, at the moment, Dell is offering to ship its desktops priced at $549 and higher for free, giving it an advantage, despite the fact that it would cost an additional $40 to bump the Dell machine to 512MB of RAM to match the HP Pavilion.

HP and Dell are also squaring off in notebooks, a red-hot category, where their least expensive models start in the $500-range.

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