HP selling cheap PCs with a LAME OS in China

[Haoqide]

Does anybody else think this is lame, providing PCs with basically outdated technology (FreeDOS?! Come on!) just to get market share? Sheesh, at least offer them with Linux or something else with a GUI! I realize that lots of people like the command line (myself included), but people as a whole want a pretty GUI for their money.

HONG KONG (Reuters) - Hewlett-Packard Co. (HPQ.N: Quote, Profile, Research) , the world's number-two PC maker, said on Friday it has launched a 3,999 yuan ($483) computer in China, turning up the heat in the intensely competitive market.

The price matches that for a similar bare-bones model rolled out earlier this year by the country's biggest seller Lenovo Group Ltd. (0992.HK: Quote, Profile, Research) , as players introduce cheaper models targeting smaller cities and the countryside where most of China's 1.3 billion people live.

The news comes days after Lenovo said it was buying IBM's (IBM.N: Quote, Profile, Research) PC-making assets for $1.25 billion to help it expand beyond the competitive domestic market.

DBS Vickers analyst Joseph Ho said he was not surprised by HP's latest China move.

"The market remains very difficult for Lenovo," he said. "Their backyard is on fire. ... The China market remains very very competitive."

HP's new model, part of its Pavilion series, features a central processing unit (CPU) from Advanced Micro Devices Inc. (AMD.N: Quote, Profile, Research) and a FreeDOS operating system, both cheaper alternatives to more popular CPUs from Intel (INTC.O: Quote, Profile, Research) and the Windows operating system from Microsoft (MSFT.O: Quote, Profile, Research) .

It recently went on sale, a spokesman said.

China recently passed Japan to become the world's second biggest PC market, with 13 million units sold last year and the number expected to grow 20 percent in 2004, according to International Data Corp.

But with many of the wealthiest big city residents already owning PCs at home, vendors are having to turn to less affluent areas to look for growth in the consumer segment.

In announcing its interim results last month, Lenovo characterised China's PC market as one with "a crisis lurking in every corner."

Lenovo already controls more than a quarter of all sales and is unlikely to see that amount grow as it faces new threats from the likes international powerhouses HP and Dell Inc. (DELL.O: Quote, Profile, Research) .

Lenovo accounted for 26.4 percent of China's unit PC sales in the third quarter, followed by domestic players Founder Group at 10.3 percent and Tongfang at 8.7 percent, according to Gartner. Dell was fourth with 8.1 percent, followed by IBM at 6 percent and HP at 5.2 percent.

Pulled from:

http://www.reuters.com/newsArticle.jhtml?storyID=7048761

[trevelyan]

It's a pretty smart move. Much of the difference between domestic and foreign firms in this market comes down to the Windows tax. Lower prices by Chinese vendors come at Microsoft's expense. The hardware is pretty much identical otherwise, especially in the desktop market.

HP is divesting itself of an uncompetitive burden: responsibility for pricing the OS. There will be Chinese players willing to do the installation/support work less expensively than they can as well. The installation CDs available on the mainland are much better than those available in the States.

The real question I see is more along the lines of... why bother? There won't be much money in selling computers to peasants. The only way I could see this making sense is as part of a larger sourcing strategy -- if HP is planning to shift more production/design to the mainland and sees this as a good way to get started, develop networks, etc.

[Chappie]

You can buy an illegal copy of WinXP for 4 yuan (if you bargain good)....