DirectWeb Cuts Free PC Fees

"We encountered a tremendous response to our original offer, so we went back to IBM and we managed to get a better price overall for the deal," says Brian Czarny, a DirectWeb spokesperson.

Under the latest offer, customers will get Internet access, a 450-MHz IBM Aptiva PC with a 15-inch monitor, and three years of IBM's On Call Service.

An enhanced service includes Internet access, the IBM PC, support, a 17-inch monitor, and a Hewlett-Packard color printer for $34.95 monthly, down from the $39.95 monthly deal offered in January.

Analysts have tracked the "free PC" sales model with interest since several companies last year tried a variety of approaches with differing degrees of success.

Some companies, such as FreePC, are no longer operating. Others, such as PeoplePC, continue to offer a PC and Internet access for three years for $24.95 monthly. Large companies such as America Online offer a $400 rebate on a PC in exchange for Internet subscription.

Size Counts

"DirectWeb is banking on using its buying power to win lower prices," Czarny says. "We're acting like a shopping club, aggregating customer buying power and helping them get better deals."

The company expects to make money by selling subscriptions, making referrals, and taking annuities based on customer links to electronic transactions. Czarny declines to release DirectWeb sales figures.

The so-called "free PC" sales model is a challenging way to make money, even without extra price slashing, one analyst observes.

"They are right on the hairy edge there" with the new price cuts, says Roger Kay, an IDC analyst. "They are basically bundling eyeballs, and there is a question whether they will ever get the money back on the back end."

The larger organizations have the better shot, Kay adds.

"Some of the larger players, like PeoplePC and AOL, might pull it off," Kay said. "They can hang around long enough to make it work."

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