Everyone is acutely aware of the pressure on PC margins, but this is getting ridiculous. A free PC scheme about to be launched by a start-up company in the US could revolutionise the way computers are sold but, according to Australian resellers, has several obstacles in its way before it will take off here.
Free-PC.com of California plans to give away 10,000 Compaq PCs with free Internet access to customers willing to forfeit detailed private information about themselves and how they'll use the computer. The FreePCs.com site has been overwhelmed by a stampede of potential customers eager to sign up.
Free-PC.com plans to ship 333MHz Compaq Presarios with special software to monitor how the PC is used. It will also deliver continual advertising in borders that run around the computer's 15in screen - whether the system is online or not.
Free-PC.com's founder Bill Gross said the company will spend about $US600 on each PC, and expects to make a profit on the targeted advertising. "Merchants will pay to reach you, so they essentially will subsidise the cost of the PC indirectly," Gross said.
"Industry pundits have said for years that PC prices would eventually drop so low that vendors would give away computers, much like cellular service providers hand out telephones. In fact, Free-PC.com might be better suited following this model and not one based on advertising revenues," suggested Tom Rhinelander, an analyst at Forrester Research.
Australian telemarketing-based reseller Netpaq introduced one such scheme last year. Netpaq spokesperson Steve Stuart said that it was currently restructuring the package. "We are offering a heavily subsidised PC based on the customer committing to a two year plan that includes Internet access, initial training and helpdesk support."
But the concensus is that it would only target the home market. One system integrator, who preferred not to be identified, did not believe the free or subsidised PC concept would impact on the corporate market. "This sort of offer is aimed at the domestic and SOHO markets, which can be better identified as advertising targets and don't have the data security problems of the corporates."
Business-to-business retail group Advanced Product Technologies (APT) sells PCs and other office products via a mix of retail, business and service centres. APT chairman Graham Harman expressed interest in the concept of a low cost or free PC but warned of its problems. Harman claimed that the low cost PC bundled with a monthly Internet service fee will be more likely to attract first-time customers, possibly with low computer literacy.
"These types of customers require a high level of support, which may not make it profitable." Harman said the other problem is that, as opposed to the mobile phone market where there are a small number of carriers, there are a large number of ISPs making Internet access plans very price-competitive. "With tight margins on Internet service, the viability of bundling such a contract with a free or cheap PC would be restricted to pay TV and communication companies here."
Harman does see it as a major threat if somebody gets their act together with the right deal. "If somebody came to Australia and said they would give 10,000 PCs away, it would at least affect 10,000 potential sales and there would be no shortage of people willing to fill out a qualifying form. But I just don't think the sums on the potential advertising revenue adds up in Australia," he added.
Don't look for free PCs on street corners anytime soon, but more companies in the US may offer free PCs before the end of the year, analysts say.