Internet Firms Plan to Offer Subsidized PCs in Europe
By NEAL E. BOUDETTE
Staff Reporter of THE WALL STREET JOURNAL
October 25, 1999
German consumers who want tap into the Internet but don't have 1,500 marks ($828.8 or 767 euros) or more to buy a personal computer might get an early Christmas present.
In the next few weeks, AOL Europe and other Internet-access providers will start subsidizing the cost of PCs in an effort to bring more people online. Customers who agree to use their services for two or three years will be able to pay for a PC in monthly installments, or get a discount from certain PC makers.
Similar deals have already appeared in the U.S. and Britain, but few have reached continental Europe. That is changing with increasing numbers of Europeans deciding it is time to get online.
AOL Europe, a joint venture between America Online Inc. and Bertelsmann AG, is negotiating with Fujitsu Siemens Computers BV to provide subsidized computers in Germany, Britain and possibly other countries. German customers would likely get a Fujitsu multimedia PC if they sign up for AOL for three years and pay 50 marks per month, people familiar with the talks said.
Frank Sarfeld, an AOL Europe spokesman, wouldn't comment on specifics, but confirmed the company is considering such an offer. "We are looking at ways of bringing AOL to people. Ninety-nine percent want to use a PC, so we have to bring them PCs," he said.
Deutsche Telekom AG, whose T-Online service is the leader in Germany, is considering special deals for specific groups, such as customers of banks that cooperate with T-Online.
Even chip maker Intel Corp. is looking for ways to play a role in subsidizing Internet access. "You will see programs where price is subsidized or there's a discount on the price and we are aggressively supporting those," said Pat Gelsinger, vice president of Intel's Internet and communications group.
Market Is Ready
Industry analysts said Europe is ripe for such offers. "PC penetration is not as high as in the U.S. and the cost [of a PC] is still one of the main detriments to going online," said Alex Rainer, an analyst at market researcher Datamonitor.
Company Profile: America Online
But it will be hard to get it just right. Experience in the U.S. and United Kingdom has shown that PC rebates can work. AOL's CompuServe unit saw its subscriber count rise by 350,000 in the U.S. and Canada in the July-September quarter after offering to take $400 (375 euros) off PCs from eMachines Inc.
Uwe Boelke, a bricklayer who lives in Nassenheide, north of Berlin, said he would have to think quite a bit before taking an offer like the one AOL is working on. "Is it better to pay 1,800 marks over three years when you could get a PC now for 1,200? I'm not sure."
More-complicated deals -- ones that include low-performance PCs or require customers to sign up for additional services -- haven't worked.
One small PC maker in Germany, IPC Archtec, is going to try, anyway. It has already announced it will sell a PC for one mark to anyone who signs up for long-distance phone services from Gigabell AG or Mannesmann Arcor AG.
Gigabell will charge 29.90 marks a month over three years to cover the cost of the computer, and 4.90 marks per month for 100 minutes of Internet access. Each additional minute costs 4.9 pfennig, including both phone and access charges.
IPC Archtec will announce details of the Arcor offer later this week.
No Windows
But there's a catch or two. First, the Archtec computer isn't a typical PC. It has a 400-megahertz Celeron processor from Intel Corp., but uses the Linux operating system instead of the more-familiar Windows from Microsoft Corp. It also doesn't include a monitor.
Claus Seifert, a spokesman for IPC Archtec, admitted that consumers might shy away from unfamiliar software, or an unknown brand, even at a price of one mark. "That could happen. People might say, 'I don't know IPC. I'd rather have Siemens.' "
However, preliminary interest has been overwhelming since word of the offer got out last week. "The phone has been ringing off the hook," Mr. Seifert said.
In Britain, Tiny Computers Ltd. made a similar offer to customers if they switched to Tiny long-distance services, but the campaign flopped.
Meanwhile, rising chip prices could spoil Christmas for Germany's would-be Internet users looking to get a subsidized PC.
Prices of memory chips and other computer components have risen because the recent earthquake in Taiwan has disrupted production for many manufacturers. As a result, some PC makers won't have enough inventory.
"We thought we would be producing 200,000 systems [for subsidy programs] before Christmas, but we are not getting the material," said Winfried Hoffmann, Fujitsu Siemens Chief Executive. "The supply situation could delay some of these subsidy plans until next year."
Write to Neal Boudette at neal.boudette@wsj.com |
