DISTRIBUTOR FORUM

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TWICE: There has been a recent jump in the number of free PC offers, typically tied to an agreement in which the cost of the PC is amortized over the life of the service contract or supported by onscreen advertising. Are these business models good for the industry?

Rogers: In my opinion, no, they are not good for the industry.

Curran: The jury is still out on the impact of these offers. What's good and not good for the industry is extraordinarily difficult to gauge.

Consider it from the peripherals manufacturer's perspective. For example, if free PC offers create a larger base of computer users, then it could mean more market opportunity for add-on products.

The answer really depends on your position in the [computer] industry. Many different approaches are being tried and will be tried over time. How they ultimately impact the industry is anyone's guess.

TWICE: Do they diminish the value of a PC in consumers' eyes?

Curran: The value of a PC, or any product for that matter, comes from its worth to the consumer. When a customer purchases a long-distance cellphone service and they receive a free or discounted phone, do they view that device as less valuable?

In one sense you can argue that it's the cost of the service that matters most, but if the phone itself doesn't operate properly, the user is frustrated and the product is of less value. On the other hand, if the phone is of high quality the consumer is impressed and appreciative.

Consumers today appreciate quality and value. If they perceive they are receiving both, then the type of deal meeting their needs becomes inconsequential.

Rogers: Yes, in my opinion, they do diminish the value of a PC in the consumer's eye. My concern is that there is no such thing as a free lunch. A PC is still a technical wonder, and it isn't clear that something received for free will ever have the support - software, product and technical, as well as upgrades - associated with it that it should have.

TWICE: Is this the most effective way of expanding PC ownership?

Rogers: No. I think that the current channels, such as mail order, retail, VARs, etc., will continue to be the place that will help new PC owners get up and running on the PC.

Curran: No. It's only one way that may expand PC ownership, but that depends on whether the strategy indeed reaches new users. Expanding PC ownership is probably best achieved today through delivering on expectations and effectively communicating the advantages of personal computing. The industry needs to continue delivering increased value and purchasing convenience to the consumer.

TWICE: How do you, as a distributor, feel about participating in these deals?

Curran: Our mission is to serve the channels that provide technology to today's users. We cannot police the marketplace or discriminate against any particular retailer or reseller.

Many different business models and strategies - some controversial and unproven - comprise today's marketplace. It will be interesting to see the types of offers developed over the next year and even more interesting to see which ones stand the test of time.

Rogers: Merisel would only support an opportunity where both parties would benefit. At this time, it's not clear how distribution could participate.

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