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To: E. Graphs who wrote (370)	9/13/1999 10:52:00 PM
From: tech101	Read Replies (1) \| Respond to of 1056

Vendors raise prices in anticipation of Y2K demand By Ephraim Schwartz InfoWorld Electric Posted at 6:06 PM PT, Sep 10, 1999 A classic imbalance in supply and demand is creating higher prices and component shortages as corporate buyers go on a shopping spree prior to a year-2000 buying freeze. But unlike previous spikes in demand that have led to increased system prices, this surge may prove to be a long-term phenomenon driven by pent-up spending that is expected to be unleashed once customers resolve their year-2000 conflicts. Smaller-sized hard drives, such as 6GB drives, Zip drives, and motherboards using the Intel BX chip set are among the components in short supply. Back orders are expected to last as long as three months for these particular components. Last month, the price of a 128MB synchronous DRAM (SDRAM) module to manufacturers was $75. This week, the price for the same module is $215. In addition, manufacturers are being put on allocation, said Art Afshar, president of Micro Express, a PC manufacturer in Irvine, Calif. The rising price of SDRAM, as well as other components, will have an effect on system pricing. One system-manufacturer spokesperson said that the company will have to raise the price of SDRAM by at least $135 because memory manufacturers are having such a difficult time meeting customer demand. One industry economist sees price increases continuing. "The spike is happening in the components [industry] right now. There will be higher prices between now and year-end," said Edward Yardeni, chief economist and global investment strategist at Deutsche Bank Securities, in New York. "There will be inventory issues but they will sort themselves out [next year]," he added. The year-2000 lockdown, predicted to start next month and last through January, appears to be behind the increased buying activity. "Unit velocity [or demand for systems] has gone up in the PC space," said Stephen Dukker, CEO at eMachines Inc., a low-cost PC manufacturer in Fremont, Calif. Prices may remain high and components scarce well into the first quarter of 2000 as well. Some analysts are citing IT demand for products needed to feed corporate electronic-commerce initiatives as one of the primary causes of the continued shortage. "Companies are eager to restart their stalled e-commerce initiatives," said Richard Arns, the executive director of Chicago Research & Planning Group, a national association of CIOs in Chicago. Up until now these initiatives have been overshadowed by year-2000 concerns, Arns said. "Buyers need to look into their crystal ball, because the vendors are going to do what is in their best interest. Prices will go up in the short term," Arns said. According to Arns, next year's IT budgets will explode. "Everyone is at the gate with the stall on Y2K. People want to run as hard as they can because there is pent-up demand for new technology in search of the silver bullet relative to e-business," Arns said. Prices in the new year will be even higher, Afshar said. "Hardware has hit the bottom and is rebounding. We are not going to see erosion in prices. There is less competition and more consolidation," Afshar said. In general many business analysts, along with Alan Greenspan, chairman of the Federal Reserve Board, believe that technology is fueling the strong demand for high-technology products and the ensuing continued economic expansion. "The Internet forced us to reckon with e-commerce. And e-commerce is a major driver in the new economy," said T.R. Webb, technology advisor to the CIO, Office of the President at Shell Oil Company, in Houston. Short of a cataclysmic collapse caused by the year-2000 crisis, Deutsche Bank's Yardeni agrees. "If Y2K is a nonevent, we are in the early stages of a high-tech revolution," Yardeni said.