To: Elwood P. Dowd (35754 )
From: PCSS
Wednesday, Nov 4 1998 7:01AM ET
Reply # of 35757
UP early El, me too .. S&P Futures look great (UP 10+), election results won't negatively
effect market, weather here is cloudy but 80s will be teeing off @ 8:30 ....
Computer Prices Begin to Flatten As Buyers Decide to Go for the Frills
By EVAN RAMSTAD Staff Reporter of THE WALL STREET JOURNAL
Computer companies are still introducing cheaper and cheaper PCs, but a funny
thing is happening: Consumers are paying less attention to price.
Average purchase prices for consumer desktop computers, which fell 29% between
January 1997 and January 1998, have leveled off at $1,130 through September this
year, according to ZD Market Intelligence of La Jolla, Calif. Home computers are
now available for as little as $500, but the cheapest machines often have
technology that is a year or so old. Faced with that option, a majority of buyers are
choosing to pay more for more up-to-date features.
"Last year, low price was all the craze. Price point, price point was all you heard,"
says Brian Connors, vice president, marketing, in the consumer PC division of
International Business Machines Corp. Now, he says, "we have seen many signs of
[price] stability."
Rod Schrock, chief of Compaq Computer Corp.'s consumer business, agrees.
"We've gone through most of the price declines," he says. Prices for corporate PCs,
which comprise a far larger market, are also more stable.
Pricey Products
More and more, customers are like Ellen Curnes, a Dallas attorney who went
shopping for her first home computer last weekend. Ms. Curnes settled on a model
with Intel Corp.'s speedy Pentium II chip, hefty memory, a digital videodisk drive, a
big monitor, a printer and a scanner at the Gateway Country store. Total bill: just
over $2,500.
She says she chose a pricier machine because she wants it to last for a while. "I
really hope I don't have to buy another for three or four years," she says.
The Slatterys of Plano, Texas, didn't even consider a cheaper PC as a replacement
for the family's three-year-old computer. "They're not good enough," says Martin
Slattery, a marketing manager. "They don't have enough power. My son likes to
use graphics programs, and we all want the fastest Internet speed we can get." The
family spent $1,800 on a Gateway computer with a Pentium II chip and a large hard
drive.
These attitudes contrast sharply with the consumer PC market a year ago, when
major manufacturers introduced systems priced below $1,000 and buyers gobbled
them up. The rapid explosion in buyers for low-priced systems forced retailers and
manufacturers to trim inventories and cut costs. But the industry also became savvy
at steering customers to higher-priced, more profitable systems.
One tactic: special deals that combine PCs with monitors, printers, scanners and
other accessories. New kiosks in stores for custom-ordering from makers like
Compaq and Hewlett-Packard Co. also emphasize more expensive PCs.
After the initial surge, retailers say, the percentage of consumers buying computers
for $1,000 or less reached about 45% and then flattened out. "I don't think that the
percentage [of low-price buyers] is going to change much," says Larry Mondry,
merchandising chief at CompUSA Inc., the nation's largest computer retailer. "But I
do think the entry-level price will continue to move down."
A study this summer by Access Media International, a New York-based
market-research firm, found that just 10% of consumers considering a PC purchase
this fall planned to spend less than $1,000. Another 26% planned to spend $1,000 to
$1,500.
In response, some manufacturers are producing fewer models priced under $1,000
and adding more in the $1,200 range. And some of the lowest PC prices are
available only through rebates, software bonuses or online subscription offers that
not all buyers seek.
Technology Sticks Around
One reason cheaper PCs aren't more attractive is that component prices haven't
fallen as quickly this year as last; that has kept older technology around longer.
Meanwhile, other factors are boosting the average price of desktop computers. One
is the late July introduction of PCs using Intel's most advanced chip, the 450-MHz
Pentium II. These PCs cost more than $1,800 and, following a typical pattern for
new technology, were greeted with high initial demand.
In addition, companies like IBM and Sony Corp. waited until fall to release new
consumer systems priced above $2,000. They had noticed that high-priced systems
seemed to sell better in the second half. "We're seeing a new seasonality emerge,"
says IBM's Mr. Connors. "As you get into the September time frame, you see the
whole range of prices on store shelves again."
Rather than work on ever-cheaper models, PC makers are starting to focus on
simpler devices -- "appliances" in techie shorthand -- as the likeliest way to spread
computing power to a majority of homes from about 45% today. To increase
revenue and profit in the meantime, manufacturers are pushing PC maintenance
and Internet access services and collecting fees from online transactions.
PC executives say steady pricing gives them breathing room to concentrate on
advances in technology. After making it possible to connect to the Internet with the
press of one button on this year's PCs, manufacturers are now developing faster
connections for next year's models. Compaq plans to equip each of its home PCs in
2000 so that it can dial through TV cable modems or new digital phone lines.
But the drive to hit lower and lower prices hasn't let up entirely. Last week, IBM
rolled out a $599 system, priced $100 below the lowest-priced Compaq model. And
emachines Inc., a joint venture of the South Korean companies TriGem Corp. and
KDS Corp., will ship a $399 computer with a $100 monitor later this month.
For those machines, there are buyers like Elisa Jocson, a software consultant who
recently moved to Dallas from the Philippines with her husband. At a Circuit City
last weekend, she bought an $899 Packard Bell with a Cyrix microprocessor and
standard memory, hard drive and monitor. Though its features are modest, the
price was right and "it's got enough power to do my work," she says.
Michael
P.S. - Yesterday's Europe PC report won't hurt CPQ either !! |
