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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Jack T. Pearson who wrote (44623)	5/25/1998 5:37:00 PM
From: Mick Mørmøny	Respond to of 176387

Low-cost PC = profits? The sub-$1,000 PC is here to stay, but not all computer companies will thrive May 25, 1998: 2:53 p.m. ET NEW YORK (CNNfn) - Whether computer companies love them or hate them, personal computers priced below $1,000 are here to stay. Some computer and chip makers have lamented the fact that low-cost computers, while boosting sales, have hurt gross margins. Meanwhile, companies such as Compaq Computer Corp. and Intel Corp. have learned to embrace the new market realities, and analysts say the sooner more companies accept it the better. International Data Corp., a market research firm that tracks computer industry trends, reports sub-$1,000 PCs will account for 25 percent of global desktop unit shipments by 2001, more than double its 12 percent market share in 1997. Still, not everyone is in the best position to take advantage of this market, and not everyone cares to. Dell says sub-$1,000 PC's overblown Michael Dell, chairman of Dell Computer Corp., told investors last week that the need for sub-$1,000 PCs is "overblown." Dell, which caters to business users and doesn't offer a low-cost consumer PC, is the only major computer vendor consistently posting strong earnings. "It's not important for Dell, but it's a viable market for some," said Louis Mazzucchelli, an analyst at Gerard Klauer Mattison. "There's clearly a demand at that price point." The demand is there, but the profits aren't necessarily following. Computer makers such as Hewlett-Packard Co. have blamed disappointing quarterly earnings in part on pricing pressures. "Someone ought to be able to make a profit," Mazzucchelli said. "If you ask Compaq, they'll tell you they're doing well in the consumer market. Compaq is getting whacked at the low-end corporate market." Mazzucchelli added consumer electronics companies who also sell computers, such as Sony Corp., are in the best position to take advantage of the sub-$1,000 market. "They're used to producing things in large volumes and selling them in the retail channel," he said. "Everyone is saying the direct channel is the best way to go. Direct may be the best way to sell a $1,500 computer, but it's not the best way to sell a $500 computer." PC price war on the horizon All signs are pointing to an even more competitive price war in the near future. Packard Bell NEC Inc., for one, is raising the ante by reducing prices once again. The company announced Thursday it will include chips from Cyrix Corp. in its new line of consumer PCs, which will likely drive prices down to $599 for a new computer. But some analysts are skeptical any company can emerge victorious from such pricing pressures. "Who's going to be the leading cannibal?" said Rick Berry, an analyst at J.P. Turner & Co. "Packard Bell is primarily known as a low-priced leader. But I think people would rather pay an extra couple hundred bucks for a computer with an Intel chip rather than a Cyrix chip." Berry added that because the market is geared toward lower prices, "the best news about PC sales and gross margins are behind us." "The consumer is the only clear winner," Berry said.