<<the price cutting doesn't sound all that good for Dell.>>
Here is some old news (from Nov. 13, 1998) I found when I cleaned up my hard disk. M. Dell was predicting that ... <<component pricing will rise, and PC prices will stabilize.>>
Tuesday November 17 5:58 PM ET
Large computer makers worry over low-cost PC
By Robert Lemos, ZDNet
LAS VEGAS -- While PC maker and price leader Emachines Inc. showed off its $399 and $499
computers here at Comdex, established PC makers worried over how the rock-bottom prices will effect
their bottom line.
"From a component standpoint, we are below where we can go," said Mal Ransom, senior vice president of PC maker
Packard Bell NEC Inc. "I don't know where the bottom is, but a year ago, I couldn't have imagined this."
Major PC makers are looking for ways to finance their foray into PCs that cost less than $500, low enough to compete with the
price set by newcomer Emachines. The result of an alliance between two Korean companies, monitor manufacturer Korean
Data Systems and systems maker U.S. Trigem, Emachines burst onto the scene in September, with a family of PCs that cost as
little as $399. By the end of the month, the PC maker had sold all of its initial lot of 250,000 computers.
Major PC makers are gunning for the company. "I think you are going to see machines in the $599 price range from most
manufacturers," said Mike Winkler, senior vice president at Compaq Computer Corp. (NYSE:CPQ).
Super (cheap) PC
At the same time, carving dollars off the price of a PC. Low-cost x86 chip maker Cyrix Corp., a subsidiary of National
Semiconductor Inc. (NYSE:NSC), believes that a primary way to get the cost down is with an integrated processor. Its newest
product, the PC-on-a-chip, will bring graphics, video and networking functions onto the core processors, saving PC makers on
the cost of separate chips.
"A PC that can do DVD, browse the Internet and play 3-D games will be available at the sub-$500 level by this time next
year," said Steve Tobak, vice president of marketing for National Semiconductor. Cyrix will be introducing the PC-on-a-chip,
codenamed Panterra, in the first quarter of 1999.
Will PCs be free?
PC makers are also looking for ways to get hardware makers and Internet service providers to pay for more of their products.
"Internet revenue - the sales of services and goods - could well subsidize the cost of the PC, just like cell phones," said
Compaq's Winkler. "We give the customer the computer in expectation of monthly revenue that we would receive."
Internet providers and peripheral makers are already signing deals with some computer makers for $50 to $100 rebates. Such
deals could become more common as PC makers try to compete for the low end.
Dell a skeptic
For retailers, the trend also spells problems. "Retailers can sell all the low-cost PCs they want," said Michael Dell, chairman and
CEO of Dell Computer Corp. (Nasdaq:DELL). "But they aren't making any money off them."
Dell is skeptical that a sub-$500 category of PCs will form. He said that PC prices are dropping due to artificially low
component prices. As manufacturers have taken capacity offline, he believes component pricing will rise, and PC prices will
stabilize.
No surprise, then, that the direct PC maker's lowest priced PC costs $1,199.
ZDNN's Margaret Kane and Michael Fitzgerald and ZDTV's Janet Yee contributed to this story.
dailynews.yahoo.com |
