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To: gnuman who wrote (60572)	7/16/1998 5:07:00 PM
From: VICTORIA GATE, MD	Read Replies (2) \| Respond to of 186894

Gene Parrott Thursday July 16 4:31 PM ET Sub-$1,000 PC market cooling off after torrid growth By Margaret Kane, ZDNet The sub-$1,000 PC revolutionized the consumer desktop market in 1997, but now it seems as if its torrid growth has abated. That section of the market seems to have stabilized at about 40 percent of the retail market, according to research conducted by ZD Market Intelligence. (ZDMI is owned by Ziff-Davis, parent company of ZDNet News.) That's down from a peak of 49.4 percent in February. "Based on the sales data of individual models , it's become clear that the sub-$1,000 PCs have hit the wall in terms of share of market and potentially growth as well," said ZDMI analyst Aaron Goldberg. 'More mature market' "It has stabilized to a more mature market," said ZDMI analyst Matt Sargent. Some of the rise in average prices is due to the release of Microsoft Corp.'s (Nasdaq:MSFT) Windows 98 operating system and Intel Corp.'s (Nasdaq:INTC) Pentium II processor, he said. "As more people demand those products, it pushes the average price back up above $1,200," he said. "Customers are well-trained that technology becomes obsolete rapidly," Goldberg said in his analysis, "and that products priced low are near the end of the life cycle. More and more retail customers are opting to trade up $300 or so and buy a product that does not appear to be on its way out." Another factor is that companies -- particularly Compaq Computer Corp. (NYSE:CPQ) -- have slacked off somewhat in the fierce competition for that market, Sargent said. Compaq wasn't the first company out with a sub-$1,000 PC, but it built the segment by virtue of its dominance in the PC market. Another surge coming? But with the release this week of new systems from IBM (NYSE:IBM) starting at $799, the pace may pick up again. "It appears to have stabilized in the time being. But I expect that will change as Compaq realizes it has to take on IBM and HP," Sargent said.