AOL offers $300 PC with one-year subscription

America Online Inc. (AOL) now sells a cheap PC designed to boost its shrinking user base with a one-year commitment to AOL's Internet access service required at purchase.

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The AOL Optimized PC, built by Systemax Inc., is a no-frills model that will compete with other low-cost PCs such as the Linux PCs built by Microtel Computer Systems Inc. and is available through Wal-Mart Stores Inc.'s Web site, and discount models from larger players such as Dell Inc. and Hewlett-Packard Co. (HP).

The PC comes with a 1.7GHz Celeron processor, 256M bytes of DDR (double data rate) SDRAM (synchronous dynamic RAM), a 40G-byte hard drive, a CD-ROM drive, a 17-inch CRT (cathode ray tube) monitor and a color printer from Lexmark International Inc. for $299. The company, a division of Time Warner Inc., has launched a Web site to promote and sell the new PC at http://www.299pcdeal.com.

The year of AOL's dial-up Internet connection service costs $23.90 a month, for a total of $286.80.

The cheapest PCs from Dell and HP cost about $450, but offer faster Celeron processors from Intel Corp., and other options such as CD-RW (CD-rewritable) drives. However, they lack monitors and printers as standard features.

Microtel's PCs cost anywhere from $200 to $500 on Wal-Mart's site with Duron processors from Advanced Micro Devices Inc. and Linux operating systems from SuSE Linux AG and Lindows.com Inc. The least expensive option comes without an operating system.

The AOL PC comes with Microsoft Corp.'s Windows XP Home, but the first screen users see is an AOL-designed interface called the AOL Desktop. The PC also comes with an office productivity software package called AOL Office Powered by Sun, which is the StarOffice software suite developed by Sun Microsystems Inc.

AOL has been selling the PC in a limited number of retail markets in the U.S. Midwest as part of a market test, an AOL spokesman said. It has offered the PC since mid-November, but the $299 offer ends Dec. 31.

AOL's Internet access service has lost 2 million U.S. users since last year's third quarter, it said when reporting financial results in October. The company now has 24.7 million members in the U.S. Membership is growing in Europe, but the company only added 113,000 users from last year's third quarter to this year's quarter for a total of 6.3 million European users, not enough to offset the U.S. losses.

The company is trying several strategies to recapture U.S. users, including a broadband service, redesigned software and a forthcoming low-cost dial-up service.