Wal-Mart sells PC sans Microsoft and Intel for $199

Peter Henderson

LOS ANGELES: Here's the pitch for what could be your next PC: No Microsoft, no Intel -- and almost no markup. By dropping software from Microsoft Corp. and avoiding "Intel inside," retailer Wal-Mart Stores Inc. is offering a $199 computer it says is a hot seller on its website, attracting novices looking for a way onto the Internet as well as high-end users wanting a second box.

The promise of a PC replacement -- slimmed down to surf the Web and carry out limited tasks -- has long tantalized the tech world but failed to generate many sales, especially as prices of name brand computers have slid. The Wal-Mart machines are full-fledged, if low-powered, computers, but they are not loaded with Microsoft's Windows software or the best known microchips -- meaning that the average user will not get exactly what he or she is used to.

"It is going to be harder to get people to adopt that sort of stuff" since most consumers want Windows, concluded Roger Kay, a PC analyst at International Data Corp research group.

Although the Wal-Mart machine has a slower microchip than more expensive computers, rival machines may not surf the Web much faster, since the speed of the Internet connection is usually the bottleneck in online tasks, said Rob Enderle, an analyst at competing research group Giga. "It is awfully hard to beat this for the price point," he said.

As Wal-Mart heads into its first holiday season offering the $199 machines, it says sales are already exceeding expectations.

"What we're finding is largely tech enthusiasts buying these items, but we've also seen some individuals, as well as businesses and some schools," said spokeswoman Cynthia Lin. She declined to quantify sales, although knowledgeable sources put them in the thousands of units per month.

Broadband Machines

The machines, manufactured by Microtel Computer Systems, aim to provide an experience similar to Windows by using operating systems based on the free Linux system. They support high-speed Internet (though the service itself is not included) and have a CD drive that can read music and data disks, but not record them. They also have relatively small hard disk drives of 10 gigabytes.

There is no modem, floppy disk drive, or monitor, and the VIA Technologies Inc. microchip that is the brains of the machine may not be known to users familiar with Intel Corp. 's Intel inside marketing campaign and Intel rival Advanced Micro Devices Inc.

The same hardware system with Windows and a modem costs $100 more, while companies like eMachines Inc., which specialize in low-end computers, offer $399 machines with Windows, low-end chips from AMD or Intel, a bigger hard drive and extra hardware such as a modem or CD-write drive.

Gary Elsasser, vice president of technology at eMachines, said that consumers wanted to be able to run any software and find computer help easily. Linux makes that hard to do. "When you switch operating systems, millions of programs no longer work. The person next door can't help you," he said. EMachines annually sells about 400,000 computers at $399 each, Elsasser said.

Freedom -- from Microsoft -- is a chief reason that consumers would buy a Linux-based machine, said Jason Spisak, marketing director of Lycoris, a nine-person start-up and one of two companies supplying Wal-Mart with an operating system for the $199 machines. The other, also Linux-based, is Lindows. Spisak says his Desktop/LX software is modeled to look like Windows XP. "We've basically taken this as far as you can go without being prosecuted," he said.

With new word processing and other office software on the way, and based on the open office system successfully developed by Sun Microsystems Inc. for Windows, Linux and other operating systems, Lycoris machines are good for light word processing, Web surfing and e-mail, which is 90 percent of what people use computers for, Spisak said.

"These (computers) are getting closer to an appliance," that will satisfy new users and power users wanting a second machine, he argued. "We're looking at a consumer who has less sophisticated needs," he said.

© Reuters