More on the pricing situation...
K.
PC prices come down hard and fast
By John G. Spooner
December 12, 1997
PC Week
'Tis the season to cut prices in the fourth quarter, but recent reductions by vendors suggest that PC prices are falling faster than ever.
Indeed, vendors that in the past dropped prices once or twice a year are now slashing prices every two to three months.
"It is frightful how quickly companies are dropping the prices on their machines," said Jeff Romick, vice president of MicroAge Carrollton, a MicroAge Inc. reseller, in Carrollton, Texas. In some cases vendors have introduced a system and cut its price in the same month.
Hewlett-Packard Co., for example, recently slashed prices on systems including its OmniBook 3000 notebook PC, which it had introduced only three weeks earlier.
In other pricing actions, Dell Computer Corp. last week cut its desktop and notebook prices by as much as 14 percent. And Compaq Computer Corp., IBM and AST Research Inc., as well as HP, have all cut prices at least once since early November.
Some analysts attribute the cuts to a fourth-quarter scramble by vendors to reduce inventory and make room for forthcoming new models.
Phillip Redman, an analyst with The Yankee Group Inc., in Boston, said vendors have been cutting prices for two reasons: Large vendors, such as Dell and IBM, dropped prices to maintain market leadership, while other vendors, such as Fujitsu PC Corp., cut prices in an attempt to gain market share.
MicroAge's Romick believes that vendors are reacting much more quickly to market indicators, such as early product run rates and their competition's pricing actions.
For example, the recent rash of price cuts on desktop systems based on Intel Corp. Pentium II processors is likely a reply to Gateway 2000 Inc., which has heavily advertised Pentium II desktop systems for a sub-$2,000 price, Romick said.
Last week, Dell dropped prices on its Pentium II systems to within $100 of the Gateway system. HP this week responded by dropping prices on its Pentium II Vectra VLs to as low as $1,639.
Pentium II systems are not alone. Similar pricing actions have been taken with notebooks. Early last month, Compaq cut notebook pricing by as much as 20 percent, lopping, for example, $1,000 from the price of its Armada 7770DMT, to $3,999. Three weeks later, HP cut its newly shipping OmniBook 3000CTX by 18 percent.
Dell last week reduced its Latitude CP notebook, which is configured with a 233MHz Pentium Processor with MMX Technology and a 13.3-inch display, from $4,699 to $4,199.
Although they started at the $5,000 level, all three vendors' systems are, for the moment, selling at approximately $4,000.
"The retail world is now dictating corporate pricing," Romick said. "It also means smaller companies are dictating prices by saying that they'd like to buy an HP at Gateway prices. Once you set special pricing, you kind of always have to do it."
One user agreed and was grateful for retail's impact on corporate PC prices.
"How many corporations are going to go to CompUSA and buy 1,000 desktop systems? Yet I think [retail] is where the pricing pressure is coming from," said David Greenberg, CEO of Visteon Corp., in Maitland, Fla. "It helps us, because it makes our total cost cheaper."
Copyright (c) 1997 ZDNet. All rights reserved. Reproduction in whole or in part in any form or medium without express written permission of ZDNet is prohibited. ZDNet and the ZDNet logo are trademarks of Ziff-Davis Publishing Company. |
