That's a good question asked by Loren Heiny at his blog:
Evidently the trick to building a lowcost UMPC is to use a big case. That's what Everex is doing with its just released $199 system which is available at Wal-Mart. Of course, you'll want to toss in a "lowcost" Linux distribution for good measure and put a hold on the display. In terms of the display, though, what does a 7" display cost anyway? $50-$100? I can't imagine more. So that means a UMPC with a Via CV7 processor like the Everex system has should be down in the $300-$400 range. Who's kidding whom here?
Makes sense. Why we still do not see that sweet spot mentioned by Microsoft of 500 dollars? I always have been asked myself from where that number came to Microsoft? Those guys working at Microsoft are far from being stupid, so if they mentioned that number is because it's realistic. We can have a UMPC for 500 dollars. So who is holding the price up?