UNDER-$1,000 MODELS GIVE LIFT TO PC SALES : MANUFACTURERS' PROFITS MAY DROP AS EXPENSIVE UNITS PASSED UP.

Byline: David E. Kalish Associated Press 

When Valorie Hubbard set out to buy her first computer, the Manhattan actress was willing to shell out $2,500 for a machine for storing business files, word processing and cruising the Internet.

Instead, she recently spent barely more than $1,000 for an ample PC from Monorail, a small Atlanta-based computer maker. Hubbard, who appears in independent films, says she has no regrets.

``I had more money to put in other aspects of my business,'' she said Wednesday.

Such sentiments are being greeted with a mixture of celebration and trepidation by the personal computer industry, which broke an important price barrier by rushing out PCs for under $1,000 in February.

Previously, personal computers selling for $1,000 were no-name, bare-bones machines sporting old technology. By loading standard features into PCs, manufacturers hoped to attract the legions of people too frugal or technology-shy to buy machines costing thousands.

Now it appears that push is working - at least partly. Reversing a recent sales slowdown, PC sales rose 6 percent in February compared to a year ago, mostly due to the introduction of sub-$1,000 machines that month, according to market research firm Computer Intelligence.

At least some of the new customers appear to be first-time buyers of moderate income, promising to expand a market long dominated by households with income of at least $60,000 a year, said Matt Sargent, an industry analyst at San Jose-based Computer Intelligence. And wealthier buyers of the cheap computers are using them as second or third machines for kids or other members of the family.

Such early signs are positive for an industry that recently has seen PC penetration of U.S. households stall at about 40 percent. But in a potentially negative omen for corporate profits, the trend also appears to be cannibalizing sales of more profitable computers.

``What we're seeing is these are being purchased in lieu of something at a higher price,'' said James Staten, an industry analyst with Dataquest Inc., a San Jose-based research firm.

``It doesn't appear that the sale of these right now are expanding the appeal of the PC in any significant way,'' he said.

For PC makers, profit margins on the new machines are as low as 10 percent - less than half of what they can earn from high-end systems. That's one reason some PC markers, notably IBM Corp. and Hewlett-Packard Corp., thus far have stayed out of the low-end market.

Indeed, PC makers are selling fewer high-end machines since the cheaper ones came out. The average price of PCs sold through large-store chains such as CompUSA dropped 10 percent in February alone, Computer Intelligence reported. Meanwhile, sub-$1,000 machines nearly quadrupled in sales as machines over $1,500 fell 28 percent in February, compared to a year ago.

Consumers also need to be cautious. Compaq Computer's Presario 2100 carries a suggested price of $999, a sleekly designed black machine that is loaded with high-tech features such as 24 megabytes of memory, an eight-speed CD-ROM, and lots of free software. But the price doesn't include a monitor, which typically costs $300 to $500.

For about the same price you can get a Packard Bell C115 multimedia PC, including a monitor. Or for $799, you can buy a Monorail PC with a built-in flat-panel display. But the display appears duller than a standard monitor, and the computer packs only a 75 megahertz Pentium microprocessor. For $999, Monorail machines includes the more standard 133-MHz chip.