Monorail: Pioneering $999 PCs from 1996

Monorail was a short-lived PC vendor from the late 1990s and early 2000s. They were the first company to sell a Pentium-class PC including a display for under $1,000. And Monorail PCs were the first desktop all-in-one computer that included an LCD rather than using a CRT. On top of all that, they assembled their computers in the USA, utilizing a facility in Kansas City, Mo. So what happened to Monorail? Why did it fail?

How Monorail PCs met the $999 price point

Monorail optimized its packaging to FedEx’s specs and designed the PC to fit a 19-inch square box.

Founded November 2, 1995, everything about Monorail’s PCs was engineered to a cost. The company itself was a small operation of 40 employees, consisting mostly of managers poached from other computer and peripheral firms. They outsourced as much as they possibly could. Monorail was an early example of a virtual corporation, or virtual enterprise. They had an office in Marietta, Georgia, near Atlanta, but other companies handled the manufacturing, distribution, accounts receivable, and anything else they could. The approach was the polar opposite of Commodore and Texas Instruments, two low-price leaders who battled 15 years before, leveraging vertical integration.

Monorail reached its low price point through logistics. Doug Johns, the principal founder, wanted to blend the approaches of his former employer, Compaq, with its build-to-order competitors, Dell and Gateway 2000. Compaq sold primarily in stores, which appealed to first-time buyers. They wanted to see and touch the product they were buying. But Compaq often ended up with inventory where they didn’t need it, and shortages elsewhere. Dell and Gateway rarely had that problem, since they used a build-to-order model.

Monorail blended the approaches. They had their manufacturer assemble a limited number of PCs from the middle of the country, send them to CompUSA, and hit the magical price point of $999, undercutting everyone else’s price when it hit the market in the Fall of 1996.

Form following logistics

There’s a concept in design called form following function. Monorail put a new spin on that concept, making its form follow logistics. Knowing that a desktop computer generally weighed 15-20 pounds (6.75 to 11.25 kg), Monorail asked Federal Express what the optimal box size is for that weight. FedEx responded the box should be 19 by 19 by 9.5 inches (48.26 by 48.26 by 24.13 cm).

Monorail’s employees then designed a utilitarian, boxy computer that could fit in a package that size. The key was incorporating a 10.4-inch dual-scan LCD panel from a laptop. A traditional CRT would have consumed nearly all of the size and weight budget all alone, but the LCD panel made it possible.

The design used a dark gray all-metal case that made it look like a piece of industrial equipment. This made it surprisingly rugged and sturdy considering it was the least expensive PC on the market.

How Monorail PCs were built to a price

The Monorail PC’s specifications were on the low side of acceptable even for 1996. Monorail equipped its least expensive model with 16 megabytes of RAM, a 4X CD-ROM drive, a 1 GB hard drive, 16-bit Soundblaster-compatible sound, and a 33.6-kilobit modem along with a 75 MHz Pentium-compatible CPU. You didn’t get Intel Inside for $999. Instead, Monorail tapped the AMD K5 processor, becoming one of the few national brands to utilize it. It was the least expensive CPU that plugged into a Socket 5 motherboard, so Monorail went with it.

Writing in the New York Times in January 1997, reviewer Stephen Manes wasn’t impressed, even though Monorail had cut the price to $899 by then. The dual-scan passive-matrix display was prone to ghosting and was limited to a resolution of 640×480 with 256 colors. Lack of any level 2 cache slowed the CPU down relative to other 75 MHz PCs on the market.

The other problem was you couldn’t upgrade it yourself. Opening the case voided the warranty, and Monorail used T15 Torx screws to discourage end users from trying. If you wanted to upgrade the memory, add a network card, or anything else, you had to ship it back to the manufacturer. Considering Monorail charged $199 to upgrade the RAM or $219 to upgrade the processor, and the freight cost $35, the first time you upgraded the machine, you lost most of the cost advantage over a more conventional PC.

Monorail PCs had one ISA slot for expansion. Monorail had its own Ethernet card specially designed for it. Few other ISA expansion cards would fit.

What went wrong for Monorail PCs

The Monorail sold well, which wasn’t surprising. It was a complete PC at a price point no one else could meet, so some segment of buyers was willing to live with the limitations. Within two months, it was one of CompUSA’s five best selling PCs.

The problem was, Monorail’s thin margins also meant little margin for error. And things did occasionally go wrong. Higher-than-anticipated demand resulted in some CompUSA locations raising the price above suggested retail at times.

The die that stamped out the steel case of the Monorail computer broke in early 1997, halting production for a week until a subcontractor could build a replacement. Worse yet, Phelps Technologies, Monorail’s manufacturing subcontractor, ran into financial difficulties in late 1997, forcing them to lay off workers even as demand for the machines increased. Phelps’ shorthandedness resulted in a 90-day backlog. Monorail switched to Synnex as its manufacturer in January 1998, and Phelps went into Chapter 11 bankruptcy February 2, 1998.

Aggressive cost cutting from the rest of the industry took the remaining shine off Monorail’s PCs. Once it was possible to get a more conventional PC at a comparable price, it made no sense to settle for Monorail’s unusual form factor and having to mail the PC back to the factory for upgrades.

When Emachines came along in the Fall of 1998 with a conventional PC made in South Korea for hundreds less, that eliminated any reason to opt for a Monorail, unless you really wanted something made in the USA. As AST Computers found the hard way, getting the average US consumer to pay extra for something made in the USA wasn’t easy.

Monorail’s change of direction for PCs

Monorail switched to a more conventional white box PC design using off-the-shelf parts in minitower cases and selling to corporations rather than to consumers, where pricing pressures were less acute. By the end of 1997, the original Monorail all-in-one design was off the market.

But like Atari and Commodore found a decade before, it’s difficult to raise prices after making a name for yourself selling the cheapest computer on the market. On July 9, 2005, Monorail ceased operations and shut down, ending the company four months short of its 10th anniversary.

It seems like getting into a price war just doesn’t end well. Commodore, Atari, Packard Bell, Monorail, and Emachines were all companies who sold mostly on price. All of them had some success for a while, but ultimately, the companies who have long, successful runs find a way to keep their margins high enough to have money to fund research and development. When the margins are too thin, something always ends up going wrong and taking you out.