Oct. 24 (Bloomberg) -- Proving Kermit's adage, Dell Inc. spent three years building 25 prototypes before the computer maker found a way to twist bamboo into a natural fiber exterior for its new ``Hybrid'' desktop.

The personal-computer industry, like Jim Henson's gangly Muppet frog, is finding it isn't easy being green. Creating biodegradable packaging, eliminating toxic chemicals from components and using energy-efficient chips means throwing out designs used for almost 30 years and starting over.

For Dell and Hewlett-Packard Co., fighting for sales in a market with some of the tightest profit margins in technology, the numbers are starting to add up. About 25 million shoppers say they would pay more for greener PCs, a Forrester Research Inc. study found. And expenses have dropped, with estimates showing it costs just 3 percent more to produce the new PCs.

``This is going to be a deciding factor for customers now,'' said David Daoud, an analyst at Framingham, Massachusetts-based IDC who researches green technology.

The Forrester study found 12 percent of the U.S. adult population would pay more for earth-friendly PCs. Half of businesses surveyed in April 2008 say they use environmental impact as a criterion in purchasing decisions, twice as many as in 2007, Cambridge, Massachusetts-based Forrester said.

The credit crisis and possible economic recession may hamper those intentions. While these PCs lower energy costs and save money, the vendors still have to prove consumers and corporations will spend the extra money up front.

Dell's Hybrid

The PC shift comes as consumers and businesses take steps to be ecologically aware, from replacing plastic grocery bags with reusable ones to replacing the corporate fleet with hybrid cars such as Toyota's Prius. Companies are buying compostable cafeteria utensils and signing contracts to use renewable fuel to power offices and plants.

Dell bills its Studio Hybrid, released in July, as the company's ``greenest PC ever.'' Aimed at consumers and small businesses, the bamboo-clad computer starts at $599. A version with a plastic sleeve, recyclable in some communities with extensive reuse programs, is $100 less.

The price is in the middle of the consumer desktop PCs on Round Rock, Texas-based Dell's Web site, which start at $279. Gone is the boxy design. This desktop is 80 percent smaller and the plastic sleeve comes in colors like Ruby and Quartz.

``Our big epiphany is that you cannot walk away from the principle of appeal,'' said Ken Musgrave, who leads Dell's research into how customers relate to the feel and appearance of computers. ``Unbelievable as it may seem, Dell and chic are being uttered in the same sentence.''

The new systems get their biggest electricity savings from low-energy chips, said Richard Doherty, an analyst at Seaford, New York-based technology researcher Envisioneering Group Inc. And Dell says the smaller size gives it another boost.

Energy Savings

Musgrave took an old Dell desktop apart recently and shook his head at the wasted space inside. The boxy 16-inch by 6-inch by 18-inch machine is now 8.8 inches tall, 3-inches wide and 8.3- inches deep and uses as much as 70 percent less energy.

The boxes, designed to be filled later with more drives and memory, required bigger fans to cool them at their greatest potential use. Consumers rarely used them that way, wasting the electricity.

Green PCs cut energy costs 21 percent a year, by adding a new power supply system that costs $20 more, said Hewlett- Packard's Kirk Godkin, senior product manager for corporate PCs.

A business that buys 2,000 would spend $40,000 more. Each desktop saves $6 to $25 in energy costs annually. Companies that leave computers running around the clock would save $50,000 and recoup their investment the first year, he said.

Not Enough

Still, even with these steps, PCs aren't as earth-friendly as they could be, Forrester analyst Christopher Mines said.

``H-P and Dell are making credible strides, but remember that these guys have PCS to sell this month, this quarter,'' he said. ``The greenest thing the PC companies could do would be to lengthen the lifecycle and warranty of their products, making PCs more upgradeable and modular -- so they don't have to be purchased and thrown away so often.''

Dell, down 53 percent this year amid concern technology spending will slip as the economy slows, fell 49 cents to $11.50 at 4 p.m. New York time in Nasdaq Stock Market trading. Hewlett- Packard slid 71 cents to $32.44 and is down 36 percent this year.

Recycled Packaging

The environmental push also changed PC packaging. Dell's Hybrid comes wrapped in recycled milk jug material, which is itself recyclable. It's easier to stack and mold than more widely used foam packing, packaging chief Oliver Campbell said.

After 20 years, Dell also is reviving the Air Paq, an inflatable plastic cushioning sleeve that laptops slide into for protection during shipping. The earlier attempt failed when the seals broke, deflating the cushion and damaging products.

Dell has now made the seals strong enough to hold up and used the new Air Paq this summer on 30,000 shipments from Ireland to countries throughout Europe, Campbell said. It's lighter, fully recyclable and it lowers freight costs --saving Dell about 20 percent on packaging, Campbell said.

Hewlett-Packard one-upped Dell with its own eco-friendly packaging, a re-usable messenger bag for its $798 Pavilion green PC. The laptop in a bag went on sale at Wal-Mart Stores Inc. in September.

Two years ago, Dell developed a similar bag package design, which was vetoed by the marketing department, Campbell said. Dell is re-working the idea, he said.

`Tie Breaker'

The economics of PC production are turning. Dell spends about 3 percent more to build a green PC and Hewlett-Packard, which has been at it longer, spends 2.5 percent more, analyst Doherty said.

Dell's global PC market share dropped to 13.6 percent from 14.1 percent in the third quarter, according to Stamford, Connecticut-based researcher Gartner Inc. Hewlett-Packard, the leader for nine straight periods, rose to 18.4 percent.

``I actually don't believe that there are very many people that are making PC decisions purely based on green attributes,'' said Ken Bosley, Hewlett-Packard's brand manager for consumer PC products. ``That said, I firmly believe there are a lot of people that will use green attributes as a tie breaker.''

To contact the reporter on this story: Melita Marie Garza in New York at mgarza4@bloomberg.net

Last Updated: October 24, 2008 16:10 EDT