PC price trends in corporate market:
PC Price Decline Accelerates
For Business Buyers
By MARK BOSLET
Dow Jones Newswires
PALO ALTO, Calif., -- Corporate purchasing
managers, watching the prices of consumer PCs fall,
have been asking, "Why not me?"
Now they are getting the answer they want.
The prices of desktop computers designed for the
business market have been falling at an accelerating pace
this year. Business buyers, who had typically been
content to pay more for machines that include extra
power and features such as management software, are
becoming as price-sensitive as their consumer
counterparts.
During the first quarter of the year, the average street
price of a desktop computer in the commercial market
fell 18%, said Joseph Loiselle, research manager at
International Data Corp. of Framingham, Mass. That's
about three times the pace of the preceeding three
quarters.
The result: The average street price of a commercial
machine now stands at $1,587, compared with $2,242
in 1996, Loiselle said.
Prices just "went off the cliff," said Rob Enderle, senior
analyst at Giga Information Group in Santa Clara, Calif.
One catalyst for the drop was price cuts by Compaq
Computer Corp. (CPQ), which, having filled up dealers'
shelves in the fourth quarter of 1997, was forced in the
following quarter to make cuts and offer incentives in
order to move quickly aging products. Other PC
suppliers, to stay competitive, had to match Compaq.
Business buyers are also benefiting from the swift decline
in prices of PC components - products such as
monitors, disk drives, memory chips and processors -
some of which has been passed along.
Imbalances between supply and demand have pressured
prices further. While many vendors have continued to
rapidly produce computers, in an effort to capture
market share, demand has been less vibrant during the
first part of the year.
And when corporate buyers do go shopping, they see
little reason to purchase the latest and greatest in
technology for their mainstream users - lower-priced
machines are perfectly adequate. Companies typically
expect computers to last three years, and few see new,
power-hungry, got-to-have software on the immediate
horizon.
"I think the focus is on price, and price alone now," said
Ashok Kumar, an analyst at Piper Jaffray Inc. And once
the price goes down, he added, there is little likelihood
of its going back up: "The price curve has shifted
permanently to the left."
Already, the impact of the aggressive pricing is being felt
by computer makers. Reporting a disappointing first
quarter last month, Compaq cited the inventory problem
- which International Business Machines Corp. (IBM)
days later said was plaguing its PC business as well.
Last week, Hewlett-Packard Co. (HWP) spelled out its
own difficulties, attributing a second-quarter loss in its
personal computer business to "fire-sale" price cuts by
Compaq. Pricing, not unit sales, was the issue, company
said.
Even Dell Computer Corp. (DELL), generally insulated
from the inventory woes because of its direct-sales
business, showed a greater-than-expected decline in its
average selling price in the first quarter.
While it is clear analysts foresaw price declines in the
business market, the size of the decreases have caught
many by surprise.
"We're seeing an acceleration in that price erosion," said
Kevin Hause, an analyst also at International Data
Corp., "mainly due to the channel inventory problems."
-By Mark Boslet; 650 496-1366
|
