Pc Makers Race To The Bottom

Two years ago, little-known Monorail Computer Corp. helped spawn a revolution in personal computers. While larger competitors sought top dollar for machines with whizzy new technologies such as Intel's Pentium chips and Microsoft's Windows 95 operating system, Monorail sold machines for as little as $999 in an effort to woo new price-sensitive users. PC giants Compaq Computer Corp. and Packard Bell NEC Inc. followed suit within months--and the PC business has never been the same.

Now, just in time for the upcoming holiday season, another industry pipsqueak is making noise--this time with a sub-$500 PC. Emachines, a startup backed by Korean computer giant TriGem Computer and display maker Korean Data Systems, will unveil a $399 computer--sans monitor--later this month. Sub-$1,000 machines have pushed average retail prices across the PC industry from about $1,600 to $1,200, but prices are still too high to attract droves of new buyers. Emachines believes its E-Tower, which will sell for less than $500 with a monitor, will appeal to the 55% of computerless households with annual incomes of $25,000 to $30,000. "This price point will open up another 20% of the market," promises Emachines CEO Stephen A. Dukker.