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April 22, 1999
Web posted at: 1:00 p.m. EDT (1700 GMT)

by Christian McIntosh

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(IDG) -- The sub-$600 computer market is growing faster than you can say "supply strain." Emachines added to the cheap PC pandemonium Tuesday, announcing a new line of $399, $499, and $599 etower systems for release this quarter.

"We are rapidly seeing the $500 price point become very real," says Rob Enderle, senior analyst with Giga Information Group. "The $500 to $600 segment is becoming the mainstream in today's computer market -- it's becoming the place where consumers are spending most of their money."

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The sub-$600 audience is also becoming savvier, a trend not lost on Emachines. While rival makers of cheap PCs continue to churn out bare-bones boxes, Emachines is trying to tap a growing segment of the cheap PC market: discerning buyers.

Price and performance

Powered by an Intel Celeron 400-MHz processor, the $599 Etower 400i comes with a 4.3GB hard drive, AGP graphics, Crystal PCI 3D audio, a 32X CD-ROM drive, two USB ports, and speakers. The 366id features a 5X DVD drive, a DVD software decoder, and a 366-MHz Celeron processor.

These high-end offerings from Emachines reflect a growing demand for performance in the sub-$600 segment of the PC market, Enderle says. "The 400-MHz Celeron PC is quite a bit quicker than any machine shipped during all of last year," he adds.

While the Celeron thoroughbreds in the Emachines stable may garner most of the headlines, the $399 Etower 333cs is no plow horse. Equipped with a Cyrix 333-MHz processor and 512KB of level 2 cache, the Etower 333cs has many of the same components as its more robust siblings, including AGP graphics and Crystal 3D audio.

Demand pressures

Hoping to avoid the production pitfalls that have plagued other vendors of cheap PCs, Emachines also announced Tuesday that its second-quarter shipments increased to 400,000. That follows 300,000 units shipped in the first quarter and brings Emachines closer to its year-end goal of delivering 2 million PCs.

Emachines' distribution goals are extremely aggressive, Enderle notes, and any time a company ramps up as much as Emachines has, it runs a risk of failing to meet demand.

"Emachines is likely to stress its channel significantly," Enderle says, "but it is certainly doable."

The bottom line, according to Enderle, is that the sub-$600 PC market will shape the industry in the years to come. "This is where we'll see the most volume by the end of the year," Enderle says. "While we expect the rest of the market to shrink, the lower-priced segment will increase at least through the third quarter of this year."