HP Tests Waters With Pint-Sized PC

Does size really matter? Hewlett-Packard thinks so.

The Palo Alto, Calif.-based company on Wednesday is launching a phone book-sized PC for the home, the Pavilion 2755C, picking up on a popular trend at the office. The Bonsai Blue and silver metallic case--not to be confused with the iMac's Bondi Blue--measures 13 inches tall, 14.75 inches deep and 4 inches wide.

Small PCs have become increasingly popular with businesses this year because of the space they save and their lower price tags. Bringing them to the home potentially opens a new market to computer makers trying to hawk their wares to an increasingly saturated U.S. market.

HP, among others, hopes the new machines--which are smaller and allegedly more stylish than standard computers--will slip unobtrusively into the home and thereby expand the digital lifestyle.

"Small form factor is one way to go," said Roger Kay, an analyst with market researcher IDC. PC makers generally have given attention to small size at the office. But "for the U.S. market, it's frequently the home that is more footprint constrained than the work environment," said Rhoda Alexander, an analyst with Stanford Resources. "You have a lot of home users, who maybe are concerned about aesthetics or who are maybe taking a monitor and computer and putting it in a general area, and maybe aren't ready for a notebook yet."

Style, though, as Mr. Blackwell can tell you, is no easy feat. Last year, Dell Computer unfurled its sculpted WebPC, only to withdraw the computer in mid-2000. Apple, often held up as an example of a company that understands industrial design, is sitting on excess inventory of its PowerMac G4 Cube.

Unlike Dell, HP is not targeting first-time buyers with this computer. Instead, the new Pavilion is positioned toward the seasoned second- or third-time computer buyer or "people living in a small apartment or condo, where the PC is kind of on display," said Bruce Greenwood, HP's product marketing manager for Pavilion. Kay agreed.

"This product appeals to people who want a PC lifestyle, and they want maybe more than one and in places where people might see them," he said.

Although HP spent time on design, the new Pavilion could fall short in several crucial areas, undermining its potential appeal to experienced PC users. Key features include an 800-MHz Pentium processor, 128MB of RAM, 11MB of shared graphics memory, a 20GB hard drive, a 4X CD-RW drive, an integrated modem and network card, and Windows Me. The Pavilion costs $1,049.

Although this is more computing power than consumers would have gotten in a top-of-the-line home PC a year ago, it lacks some of the features that seem to draw repeat buyers. A low-powered, non-upgradeable graphics accelerator and the absence of a DVD drive for playing movies are major oversights in a system for the living room, analysts say.

"The lack of a DVD drive and the graphics is a problem," Gartner analyst Kevin Knox said. "It's not an entry-level product or a first-time buyer box. It's not powerful enough to be a gaming machine, so I think it will fall through the cracks."

Still, the inclusion of CD-RW is important. About 40 percent of PCs sold now pack the drives, which are popular for creating music CDs, archiving photos or backing up data. In an unusual move, HP initially will offer the system directly via Web, phone or in-store kiosks.

"They're probably getting their toe in the water with this only-direct model, and this probably isn't a bad product to do that," Knox said.

Similar to Gateway and IBM, HP will also use the PC as a vehicle for popularizing flat-panel monitors. It will sell the computer with cathode ray tube (CRT) monitors or liquid crystal display (LCD) panels.

Bundling HP's FX70 consumer LCD monitor, though, adds nearly $900 to the price, which could make it expensive now that other flat-panel monitor makers are slashing prices because of excess supply.

"By Christmas, retailers will offer bundles of small form factor PCs and LCD monitors for as little as $1,500," Alexander said.

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