Building a high-performance PC, $200 at a time

Discount Store News, Sept 16, 1996

If the profit has evaporated from the PC market, why are CompUSA and Best Buy doing so well in the category? In its fourth quarter, CompUSA's profits more than doubled compared to a year ago, and same store sales have been on the upswing all year. Meanwhile, Best Buy showed and 8% increase in same store sales in July, crediting its newly beefed up appliance department--and increases in computer sales, mostly in the peripheral area.

PC owners are finding that leading-edge computer technology is delivering fewer added benefits than was true in the past. Instead of plunking down $2,000 or more for the latest and greatest, many now tend to purchase the features they really want a la carte.

A wide offering of powerful add-on products at or below the "magic" price point of $199 is delivering phenomenal value and performance. "At $200, you have a truly mass market price point," noted Yamaha product and marketing manager Gerry Tschetter. "If you look at the peripheral market, nearly everything costs $200 or less."

The model in this market is Iomega's Zip Drive, which blew off shelves when it was introduced more than a year ago. Offering the power of a new hard drive with carry-along flexibility, Zip Drive quickly became a hit with power users and home office workers, who could now carry a gigabyte of information in a briefcase.

Over the past year, the ranks of products priced in the $200 range has swelled to include high-speed modems, color printers, powered speaker systems, video accelerators, uninterruptible power protectors, scanners, MIDI keyboards, digital cameras and dozens of other applications that may or may not come with upper-end systems.

In part, the reduced price points can be attributed to plummeting prices for DRAM memory. According to Mike Metro, vp marketing at PNY Electronics, prices are now about half of what they were a year ago, which has created a boom in memory sales.

According to Ken Wirt of Diamond Multimedia, the company is now selling a four-megabyte 3D Stealth 2000XL accelerator for $199; that product cost $569 a year ago. The 3D Stealth (soon to be joined by a slightly more expensive piece, Monster 3D, for high-end gaming) speeds up all graphics by taking over the screen-drawing function from the CPU. "Even if you have an old computer, you'll see increased speed in all your applications, particularly games," Wirt said.

Diamond is also shipping new 33.6-bps modems at about $170, which not only speed up communications, but are configured to allow two-way video transmission as well. "The Internet is the hottest computer application in the home market," Wirt noted. "Anything that improves performance is going to sell well, and the prices are much more attractive this year than last."

Another approach to communications comes from Global Village, which just introduced its NewsCatcher peripheral. NewsCatcher (about $150, including a year of basic service) acts as a wireless Internet node, delivering multimedia news and information from the Internet all day, without having to dial in.

According to Kevin Burr, director of marketing, consumers can have real-time stock quotes, news, sports scores, weather, e-mail, lifestyle reports and other information delivered directly to their PCs, all of it customized and filtered to each user's specifications. "The users just turn on their computers and click on the NewsCatcher icon," Burr said. "And they get an instant, up-to-the-minute newspaper right on the screen, with no dial-in and no searching." The service costs $24 per month after the first year, with premiere service, which offers 10-minute updates, at a slightly higher cost.

With speedier gaming made possible by high-end PCs and peripherals like Stealth 3D often comes improved sound. While speaker systems built into newer PCs are far more powerful than just a year ago, aftermarket speaker systems are booming. And with high-performance, low-cost systems available from suppliers like Bose, Labtec and Yamaha, consumers are gobbling up speakers that can almost make a PC a second audio system, again at well under $200. Yamaha, for instance, has two systems with powered speakers, a subwoofer and a sound card upgrade for MIDI applications for about $170. The company is also introducing an electronic keyboard package, with instruction software from Voyetra and all necessary cables and connections, aimed at the home market. Called PC Music Studio, the keyboard is the first system that doesn't have to be plugged directly into the PC's sound card, making it truly "plug and play." "It's a great starter kit," Tschetter said. "They can take lessons anytime they want at the PC, then unplug the keyboard and practice anywhere on battery power." The PC Music Studio will have a list price of $299.

As computers become ever more vital to the everyday life of millions of consumers, protecting data and the system itself is becoming more important. Surge protectors continue to sell strongly, with prices as low as $10, but the real growth is coming in uninterruptible power supplies (UPS), which not only protect against surges, but also defend against power outages, which, given grid problems in the West and Northwest, are becoming more common.