By Jim Finkle and Duncan Martell

BOSTON/SAN FRANCISCO (Reuters) - Intel Corp said on Wednesday sub-$300 laptops initially designed for poor children will soon be available to U.S. and European consumers in a move that could further push down computer prices.


PC makers in the United States and in Europe will sell a yet-to-be-unveiled, second-generation version of the Intel-designed Classmate PC for $250 to $350, said Lila Ibrahim, general manager of Intel's emerging market platform's group, in an interview with Reuters.

"This is a very big deal," said Laura Didio, an analyst with Yankee Group who follows the personal computer industry.

While the machines are intended for children, analysts said the launch will add momentum to the low-cost computing movement -- and will likely mean this year's bargain-basement laptops will have more power than in previous years.

"Particularly in a recession year, quality low-cost products are going to move well," said Rob Enderle, an analyst with the Enderle Group. "But the key is for them to be quality."

He said while he hasn't yet seen the machines that will be on sale this Christmas, he suspects consumers will be able to get "a pretty decent" laptop for less than $600 and perhaps for less than $500.

Didio said retailers might throw in another $50 to $100 in rebates or other incentives.

Laptop prices have been under extra pressure since last year, when Taiwan's Asustek Computer Inc introduced the $399 Eee PC, which has flown off store shelves from Asia to North America.

The machine runs on the Linux operating system, and people used to Microsoft's Windows and Apple's Mac OS X operating systems have had trouble adapting to the system, Enderle said.

The new, cheap laptops being developed from Intel's technology will likely run on Windows, he added.

The movement toward low-cost computing was also spurred by the XO laptop, the brainchild of Massachusetts Institute of Technology professor Nicholas Negroponte and his One Laptop Per Child Foundation.

The foundation began producing a laptop running on Linux at a cost of $188 in November. They sold them in the United States and in Canada for $400 through a charity drive that also provided one machine to a poor child overseas.

The chipmaker has conducted pilot tests of the Classmate PC at schools in Texas, Oregon and California, along with some schools in Australia, said Intel spokeswoman Agnes Kwan.

Intel said manufacturers in India, Mexico and Indonesia already have begun selling Classmate PC laptops on the retail market.

To date, Intel has sold fewer than 100,000 of the Classmate PCs, but plans to ramp up production in 2008.

Intel declined to identify the PC makers or discuss the features of the second-generation machine, which has not yet been released in developing markets, at the request of the companies.

It has already begun work on a third model, the Classmate 3, said Ibrahim.

The second- and third-generation models of the Classmate PC design give manufacturers flexibility to build a range of laptops with different memory configurations, screen sizes and peripheral devices including cameras, Ibrahim said.

Inventor Mary Lou Jepsen, a scientist who developed the XO Laptop, resigned from the One Laptop Per Child Foundation at the end of last year and started her own company Pixel Qi with the goal of building a $75 laptop by 2010.

(Reporting by Jim Finkle in Boston and Duncan Martell in San Francisco; editing by Carol Bishopric/Jeffrey Benkoe)
© Copyright 2007 Reuters.

Photo:
Craig Barrett (C), chairman of Intel, looks on as a student of Gwarinpa secondary school uses a laptop computer in Abuja, Nigeria, October 31, 2007. REUTERS/Afolabi Sotunde