News Alert from AP Online via Quote.com
Topic: (NASDAQ:EGGS) Egghead.Com Inc, (NASDAQ:IDTI) Integrated Device Tech,
(NASDAQ:MSFT) Microsoft Corp, (NASDAQ:INTC) Intel Corp, (NYSE:AMD) Advanced
Micro Devices Inc, (NYSE:NSM) Natl Semiconductor, (NYSE:HWP) Hewlett Packard Co
(De), (NYSE:IBM) Intl Business Machines Corp,
Quote.com News Item #7436594
Headline: PC Prices Break Below $400 Mark
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By DAVID E. KALISH
AP Business Writer
NEW YORK (AP) - Personal computers, which tumbled below the
$1,000-price barrier just 18 months ago, now are breaking through
the $400-price mark - putting them within reach of the average U.S.
family.
The plunge in PC prices reflects declining wholesale prices for
computer parts, such as microprocessors, memory chips and hard
drives.
But PC makers also are responding to a profound shift in U.S.
buying habits: Today's consumers care more about bargains than the
latest technology for running fancy software, like PC games with
3-D imagery.
''We've seen a massive transformation in the PC business,'' said
Andrew Peck, an analyst with Cowen & Co., based in Boston.
Micro Center, a Columbus, Ohio-based chain of 13 computer
stores, early this month began selling a $399 computer under the
Power Spec label. On Thursday, PrecisionTec LLC, a maker based in
Costa Mesa, Calif., introduced its Gazelle machine for the same
price, for sale over the Internet through Egghead.com and other
Web-site companies.
The low prices don't include computer monitors, which usually
start at about $150. But they expand a growing sub-$500 market.
Millenium Electronics Inc., for example, in March began selling a
$499 machine under the Laguna label at Sun TV & Appliances Inc. and
Fry's Electronics stores.
Because of the sharp drop in PC prices, nearly one out of every
two U.S. families are expected to own a desktop machine by year
end, up from 45 percent at the end of 1997, according to Matt
Sargent, an analyst with ZD Market Intelligence, a La Jolla,
Calif.-based market research firm.
Many of the new buyers are expected to be from families making
less than $30,000 a year, expanding the pool of traditional buyers,
who usually come from families making $50,000 or more.
The lower-income buyers ''just don't need as much computing
power,'' Sargent said. ''They are only willing to pay a certain
amount of money for it.''
But for many new computer users and second-time buyers, those
lower prices don't necessarily sacrifice computer performance.
Today's computers costing below $1,000 are equal or greater in
power than PCs costing $1,500 and more just a few years ago -
working well for word processing, spread-sheet applications and
Internet access, the most popular computer uses.
''Sometimes you don't neen a Ferrari to drive 55 miles an hour
down the freeway,'' said John Torres, head of Irvine, Calif.-based
Millenium, whose $499 machine comes equipped with a 200-megaherz
microprocessor from Integrated Device Technology, and runs
Microsoft's latest Windows 98 operating system.
The low-priced computer trend has caused headaches for Intel
Corp., whose microprocessors are the brains in about 90 percent of
the world's personal computers.
The Santa Clara, Calif., company became the No. 1 chip maker by
developing increasingly powerful microprocessors, enabling more and
more computer users to operate advanced applications for 3-D
graphics, video and other features. Intel has spent hundreds of
millions of dollars to promote its Pentium chip since introducing
it in 1993.
But Intel rivals Advanced Micro Devices Inc., National
Semiconductor Corp.'s Cyrix and IDT, which have focused on making
inexpensive chips, are making inroads into selling chips to makers
of sub-$1,000 computers.
Recognizing the threat, Intel on Monday plans to introduce its
fiercest response to date to the sub-$1,000 computers, an improved
version of the low-end Celeron chip it launched earlier this year.
The original Celeron chip had been poorly received by PC makers
because it didn't perform as well as similarly priced chips from
AMD and Cyrix.
The trend toward lower-price chips has raised growing concerns
about Intel's ability to maintain its historically high profit
margins. But at the same time it's pushing low-priced
microprocessors, Intel is hedging its bets. Also on Monday, the
company plans to introduce a new chip as the brains of powerful
corporate desktop machines, which will earn Intel fatter profit
margins than cheaper microprocessors.
It's not just Intel that has Wall Street analysts concerned.
Several major PC makers, including Compaq, Hewlett-Packard and
IBM, have reported lackluster financial results amid the PC price
war. And the smaller upstarts, despite their enthusiasm for the new
class of sub-$500 PCs, also are smarting from the razor-thin profit
margins.
''Making money is a challenge,'' acknowledged Michael Papai,
vice president of retail marketing for Micro Center, which
estimates it's selling 3,000 to 3,500 sub-$500 PCs a month. |
