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A challenging season

The computer industry needs more consumers like Mark Betts this holiday shopping season. But it's probably going to get more like Marian Krauthamer.

Betts of Odessa went to the Dell Computer kiosk at Westfield Shoppingtown Citrus Park to check out _ and buy _ a replacement laptop for his father-in-law.

Krauthamer of Tampa stopped to look and ask a few questions but wasn't ready to add a fourth PC to her collection.

That's the great challenge for the computer industry as it heads into the important holiday shopping season: getting people who already own computers to buy new ones because the pool of people without a computer has been shrinking.

As much as manufacturers tout speedier and more powerful computers, lower prices and multimedia features, consumers aren't biting. The computers they already have are often plenty powerful enough to surf the Web, send and receive e-mails, play most games and handle family photography.

Only 11 percent of U.S. households with a PC plan to buy a new computer in the next six months, according to a survey from Odyssey Ventures, a San Francisco market research company. That's the lowest level in five years. Users are keeping their machines longer: At least half of all owners have PCs that are least 2 years old, the highest percentage in eight years.

That's critical for the industry because upgrading accounts for 80 to 85 percent of sales, according to Gartner Inc. research.

Consumers aren't the only ones left cold by this season's offerings. Experts aren't swooning either.

"There's not a lot of new and interesting things," said Roger Kay, an analyst with IDC. "Our forecast is for a modest season." That means only small sales increases.

So the industry is putting more effort into marketing its wares.

Apple Computer's clever Switch campaign is trying to get Windows users to abandon PCs for Macs.

Dell, the pioneer in online sales, set up kiosks in 20 test markets, including four regional malls in the Tampa Bay area, so consumers could see the machines close up. Gateway added 150 gadgets to its stores, from digital cameras to MP3 players to software, so consumers can try them out before buying.

Except for Apple, "one of the reasons things are unexciting is that there really have not been solid attempts to differentiate" their products, said Stephen Baker, an analyst with NPDTechworld.

Nor has being different worked wonders for Apple in the past. The company has seen its share of the market decline four years in a row through 2001, to 3.1 percent, according to IDC, a research company.

But if the current ad campaign is helping Apple solidify its own market "that's a pretty good thing," Baker said.

Dell has been happy with the results at its bay area kiosks, says Brent Thomas, the region manager. "Everybody turns to look" when they walk by, said Thomas, who won't know until January if Dell will continue the program.

Thomas, who previously worked at one of Dell's call centers, prefers the human touch, which might be blasphemy from a company that personifies selling online.

He said consumers enjoy playing with the machines and seeing firsthand the differences between a standard monitor and a flat panel.

Consumers who look carefully will find these differences in this year's PC offerings:

+ Flat panel monitors. With Apple taking the lead, more computermakers are offering the sleeker monitors as standard features on more models, even on entry-level machines priced at $699. They take up less space on a desk (at about 8 inches deep) and are easier on the eyes, with crisper resolution.

"We may see some really aggressive pricing on the day after Thanksgiving," Baker said. "It's an upgrade people place a value on."

Flat panels still are more expensive than standard CRT (cathode ray tube) monitors, but the differences are worth it. Prices on 15-inch flat-panel monitors have been running as low as $350, and 17-inch models are in the $600 to $800 range, down from $1,000 or more a year ago. And a 15-inch flat panel is the equivalent of a 17-inch standard CRT monitor.

"The quality has improved, but I think whenever a consumer considers purchasing one they should look at it in the store," said Alan Stafford, senior editor at PC World magazine (www.pcworld.com). "Some of them, especially inexpensive models, have very narrow angles of view, and it's like looking through a tunnel. It also can be bad for gaming, but they're great for text and Web pages."

+ Even more speed. Last week, Intel came out with the first 3-gigahertz chip. But what makes this Pentium 4 more interesting than its speed is technology called hyper-threading. That allows the computer to handle more than one task at a time better than current chips, according to Brian Favrel, Intel's desktop marketing manager.

While a user may have several windows open at any one time now, the computer actually is just working on one and switches when the user clicks on a different window.

The new chip can handle two instructions at the same time, so playing a game while burning a CD won't bog down the system, Favrel says. The chip seems particularly designed for users who are into music, videos and gaming, though the technology was first introduced for businesses.

The hyper-threading chip is available on PCs now. But, as with the first wave of new chips, consumers can expect to pay more for these machines in the first few months.

+ DVD writers. The industry has been promoting making and editing home videos, then burning them on disks for some time. This year, experts expect DVD-RW drives to be standard on pricier machines, generally those costing more than $1,000.

"DVD is basically going to replace CD-RW," IDC Kay's said. "The drives are as low as $300 now, and incredibly fast." (Generally, DVD drives can read disks made in CD burners, but the DVDs made on them cannot be played in CD drives, so those into both video and audio often pay extra for computers with both.)

+ All-in-one machines. Again, Apple set the trend in this area with the stylish iMac, which combines the monitor and processor into a single piece of equipment. Others followed, including Gateway with its Profile 4 and Sony with a VAIO model. These machines look cool and take up less space.

+ Apple's Jaguar. Apple upgraded its operating system, releasing Mac OS X 10.2, also known as Jaguar. The system includes a number of new features, including chat and improved networking, particularly with Windows machines. The company was criticized for charging $129 for the upgrade, which came out about 18 months after the first version of Mac OS X (pronounced ten), but it's included on new computers.

+ Notebooks. One sector that has been hot this year is notebooks. Prices are down, starting at less than $1,000. NPDTechworld's Baker says people are buying because the mobile machines have closed the tech gap with their desktop cousins on speed and features.

People who are buying a replacement machine or upgrading "are more likely to buy a notebook than someone buying a first computer," Baker said. These buyers likely have a home network, probably wireless, and want more freedom in the house.

And, because these buyers aren't frequently lugging the computers on business trips, manufacturers can pack in more features and add weight without causing problems.

The newest entry in the notebook sector is the Tablet PC, which Microsoft spent $400-million developing. It runs any program a traditional notebook can, but it also has a touch screen, an electronic stylus and a version of Windows XP that includes handwriting recognition. You can use it as a notepad to take notes or attach comments to documents.

+ USB 2.0. This new standard transfers data faster between the computer and devices such as printers and scanners if those devices were designed to take advantage of the new speed. (For those thinking of upgrading, USB 2.0 requires a special card and at least Windows 98.)

It's unlikely consumers shopping for a new computer will suffer from sticker shock, because prices remain similar to last year's levels. But consumers will have more choices for $399 PCs (without monitors). Once the domain of eMachines, the field now includes offerings from Gateway and Hewlett-Packard.

Another new low-cost entry this year is from Microtel, which offers a $199.86 machine (without monitor) through Walmart.com. It runs a version of the Linux operating system called Lindows (www.lindows.com) that is supposed to be compatible with Windows programs, but the system has received mixed reviews.

"If consumers choose carefully, they can get a pretty powerful, well-equipped PC for less than $1,000," PC World's Stafford said.

Stafford warns consumers buying online that they need to be aware of shipping costs, which can increase the price by $100 or more. And when shopping online, he suggests checking out coupon sites, such as www.dealnews.com.

"Often Dell and Gateway and Office Depot, places that carry other name brands, will post online coupons that will let you save anywhere from $50 to $100," he said. "It varies, and changes almost daily."

Most computermakers won't have a glut of inventory. Ahead of the holidays, though, expect plenty of incentives, such as rebates and extended low- or no-interest financing, free CD or DVD burners and aggressive pricing among the companies.

"There's not going to be a lot of product to be discounted after the holidays this year," IDC's Kay said. "They'll do their best to sell during the holiday season."

_ Information from Times wires was used in this report. Dave Gussow can be reached at gussowsptimes.com or (727) 445-4228.

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