Is $200 the magic number for PCs?

While big-name PC makers like Hewlett-Packard and Gateway offer desktops priced as low as $399, without a monitor, smaller manufacturers are finding an audience by offering less-expensive machines, starting as low as $199.

The PCs don't have Windows preinstalled but rely on software from several companies, including Lindows, that use the open-source Linux operating system, which can be used as an alternative to Microsoft's Windows. Dropping Windows is part of the reason why manufacturers can sell the PCs so cheaply.

These so-called $200 desktop PCs don't always measure up to brand-name competition, such as Gateway's $399 300S, in clock speed or storage capacity. But the less-expensive desktops have been catching on by appealing to consumers and small-business owners who think even the cheapest desktop now has the performance necessary to tackle everyday tasks such as Web browsing, analysts say.

A handful of PC makers and sellers, including TigerDirect, Fry's Electronics and Microtel Computer Systems sell, or have offered, PCs priced around $200. Analysts like Dean McCarron, principal at Mercury Research, believe these manufacturers are chasing a market that, at most, represents a few hundred thousand units right now. That's a drop in the bucket compared with the worldwide PC market's total size of about 130 million units. But the machines' price tags and basic functionalities appeal to enough buyers to make it worthwhile, the manufacturers say.

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