Skeeter,
Here, I did a little of your homework for you.
PC Empowerment; A flood of sub-$600 systems brings technology to those of modest means and modest needs.
(Industry Trend or Event)
Computer Shopper, June 1999 v19 i6 p129(1)
Author
Fairlie, Rik
Full Text
The gap between the haves and the have-nots in the computing world is creaking shut. That's due in part to the proliferation of systems priced at $600 or less, excluding monitor.
Sub-$600 PCs are the fastest-growing segment of the PC market. This year sub-$600 PCs will account for 10.8 percent of retail and direct U.S. consumer sales, according to International Data Corp. (IDC). This new segment is expected to rise to 13.7 percent next year, an increase of 27 percent.
Compare these superaffordable systems with what is generally considered the heart of the home market, systems priced from $1,000 to $1,500. Dataquest estimates that desktops in this price range will account for 26.9 percent of sales this year and increase a mere 0.4 percentage point in 2000, registering a puny 1.5 percent growth rate.
Sub-$600 PCs are clearly catching on. "They're the price of a TV or stereo, and that's a great deal for families who haven't been able to afford $1,200 to $1,500 for a PC," says Schelley M. Olhava, a desktop analyst for IDC.
Most of the players in this arena offer PCs with monitors for $600 or less. Systems of this sort are typically decked out with entry-level processors, 32MB of RAM, a 2GB or 3GB hard drive, a 15-inch monitor, a CD-ROM drive, a 56Kbps modem, and a (somewhat anemic) graphics card. Some even include productivity apps and free Internet access. All things considered, they can be an appealing deal for users of modest means--and needs.
While these "good-enough" systems promise an entry point for the cash- constrained, there are a few potential pitfalls. Hidden costs such as toll-call technical support, inflated shipping fees, one-year warranties, and even order transaction fees are not uncommon. Another important consideration is whether the company is stable and likely to be around in a year or so to deliver continued service and support.
Despite these add-on costs and uncertainties, more and more companies are jumping into the superdiscount market.
One of the newest entrants is Microworkz Computer Corp., which began on March 19 taking orders for a $299 PC direct from its Web site. The Webzter Jr. is built around a Cyrix M II-300 processor and includes Corel WordPerfect Suite 8 and one year of unlimited Internet access through a partnership with EarthLink.
Most users, however, wouldn't spring for this configuration because the baseline Webzter Jr. doesn't include a floppy drive, a CD-ROM drive, or speakers. The oddly labeled Convenience Pack adds these components for $99. Tack on a 15-inch monitor, and the total price is $538.
Microworkz offers only 15 days of toll-free technical support, but buyers can purchase an extended three-year onsite warranty for only $49. Shipping is $95, which is suspiciously costly for UPS Ground service.
PowerSpec, a sister company of WinBook Computer Corp., will begin shipping this month a $399 system powered by a 333MHz Celeron. A 15- inch monitor brings the total to $499, and PowerSpec says ground shipping is only $20. The company offers a one-year warranty and technical support 17 hours a day, every day. PowerSpec plans to launch its e-commerce site this month.
The pioneer of cheap computing, Emachines, offers a series of PCs that start at $399. Its most affordable model is the etower 333cs, featuring a 333MHz Cyrix M II CPU; a 15-inch monitor adds $139, bringing the tally to $538. Technical support is available 16 hours a day, seven days a week, but you'll pay for the long-distance call. Emachines plans to start bundling its own private-label Internet access with its systems, but details were sketchy at press time.
Acer America Corp., whichhas moved its Aspire line from retail outlets to its Web store, plans to offer a system for roughly $500 in a month or so. Currently, the Aspire 2194, powered by an AMD K6-2 processor,sells for $679, 15-inch monitor included. Ground shipping charges range from $30 to $40. Acer has just put the finishing touches on a new 60,000-square-foot service center in Temple, Texas, an addition that will enable the company to offer its first three-year extended warranty.
While these starter systems will surely fail to fit the bill for power users, they might help a lot of cash-strapped would-be users meet their bills. And that's a pretty great deal.
So, since the article only covers IDC's estimates of the <$600 and $1000-$1500 price bands, we have one assumption to make (the split between the $600-$1000 and >$1500 bands). In 1999, the two price bands listed in the article accounted for 37.3% (=10.8% and 26.5%) of the market. And next year those numbers will be 41.6% (=13.7% and 26.9%). The estimate that Intel has used is that the high-end systems account for 20% of the market, which we'll assume is anything over $1500 (I'm giving you the benefit of the doubt because if you assume that the high-end is an even higher price point band, then more volume is shifted higher to fill the $1500-$X band and less is left to fill the $600-$1000 band). Let's also assume that the high-end market share drops to 15% in 2000. That leaves 42.7% and 43.4% for the $600-$1000 price point in 1999 and 2000.
(Notice, too, that their share estimates of your favorite segments are not growing all that rapidly.)
So we have the following market share breakdown by price band:
1999 2000
<$600 10.8% 13.7%
$600-$1000 42.7% 43.4%
$1000-$1500 26.5% 26.9%
>$1500 20.0% 15.0%
Looks like a nice Gaussian distribution (I think that's right) with price band widths of $600, $400, $500, and infinite.
So in 1999, RDRAM is going after the 20% at the high end. Dell is the significant market leader in this segment, and has committed whole-hearedly to RDRAM. Intel has said that in 2000 RDRAM will migrate to the mid-level PC as well (not unreasonable since the mid-range segment will now be using PIII-600s and above), so now we have the opportunity to reach 41.9% of the market (15% + 26.9%). In 2000, all of the other PC manufacturers will follow up on their commitments to bring out RDRAM systems (don't forget: Compaq is already buying RDRAM! IBM has reiterated their support!). By 2001, we'll pick up the $600-$1000 band as PIII-600s migrate to that level and RDRAM prices continue to drop (don't forget: Micron has said it's their most strategic opportunity right now! [unclewest can fill in the other support statements here] and now we have the opportunity to reach 80+% of the market.
If you continue Intel's 70% share of the chipset market, we will have 56% of the market by 2001. Even if you think Intel's share drops to 50% we'll have 40% of the market. Now we can plug in the DRAM market sizes and figure out what that means.
I've been kind in making all the assumptions work in your favor. And these numbers still look great for RDRAM.
So I've done your homework and you've provided bupkus. I'm not going to argue with you about my estimates -- if you want to dissect them, then you better supply some credible numbers from a credible source. None of this "I think" or "I believe" or "IMHO" b.s.
Dave
p.s. This is U.S. only. The rest of the world is skewed much more to the high end. |
