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THE MEXICAN: Not as cheap as chips

THE MEXICAN: Not as cheap as chips

As any retailer will tell you, and as Harvey Norman supremo Gerry Harvey has told ARN in the past, PCs are too expensive. If computers were comparable in price to TVs, games consoles and DVD players, they would walk out the door.

At sub-$1,000 a pop, families would be encouraged to buy another one or two computers and businesses would refresh old inventory or add new systems. Once there is a wave of new hardware in homes and businesses around the country, there is a ready-made driver for all of the peripherals, software and services sales that follow.

This theory has already proven itself in Germany where, according to a report by IDG's Düsseldorf bureau, a popular supermarket chain sold 100,000 low-cost PCs in its stores within hours.

Unfortunately, to date the majority of cut-price PC brands in Australia have been notoriously dodgy. They tend to land in a blaze of glory, advertise profusely, take bucket loads of money from innocents and leave a trail of destruction and dissatisfied customers as they slink off into oblivion. It seems the only way for people to sell cheap PCs is for them to engage in practices that are not quite above board.

So why is a personal computer so expensive? Especially when the vast majority of the population don't require extraordinary processing grunt or complex software (a point made by ARN columnist Matthew JC. Powell in last week's edition).

I'll give you a hint. It's not the cost of components. These have been reduced to a bare minimum through competition and mass manufacturing in developing countries.

No, it's the cost of the processors and basic software that swells the cost of PCs. Incidentally, these are the two areas where competition is least evident.

Processors at least afford some sort of competition between alpha male Intel and sole pack-dog AMD, but not a huge amount. Meanwhile, in personal software circles, there is no such luxury, with one player dominating operating systems and basic application software.

The reality is that we're never going to get really cheap PCs while Microsoft remains so dominant as a supplier of PC OSes. Microsoft applications are the single most expensive component in a PC. Because of its monopolistic position, it can charge excessive amounts and insist on making people pay for more than they need.

Windows XP retails for $675, or $463 if upgrading from a previous version, while Office XP retails for $1,072, or $534 as an upgrade.

As an OEM product, XP Pro will set back the reseller $273 and Office XP Pro is worth $550. If you want to buy Word 2002 alone it retails for $758, or $187 as an upgrade. As an OEM product it costs nearly $400.

Would it not stimulate sales if a lower-cost operating system were available that was a slightly more reliable version of what Windows 95 offered? Consider if such an operating system were also bundled with lower-spec versions of the applications used by the majority of people? Forget all the hangers-on. Sell them as individual components if users need them.

Of course, this is a pipedream but it sure would go a long way towards reducing the cost of PCs and giving the industry a much-needed boost.

Gerard Norsa can be contacted at 03 9690 2933 or gerard_norsa@idg.com.au.


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