Notebook: Intel is in a majority position, so the impact of competitors will be noticeable.
Notebooks Take The Price Plunge
(10/02/98 3:15 p.m. ET)
By Todd Wasserman & Doug Olenick, Computer Retail
Week
With desktop PCs free-falling to sub-$500 levels,
notebook computers, egged on by the development of
low-cost chips, are edging toward a plunge into
sub-$1,000 waters.
While analysts praise notebook computers as an oasis
of price stability, budget-priced mobile processors to
be rolled out by Intel, Advanced Micro Devices
(AMD), Cyrix, and IDT may shake up the situation in
the sub-$1,000 category in coming months.
Cyrix, a division of National Semiconductor, said its
efforts at the low end could result in top-tier branded
notebooks in the sub-$1,000 market before the end of
the year.
Forrest Norrod, senior director of mobile products for
Cyrix, said several vendors are planning releases based
on Cyrix's 233 MHz and 266 MHz MediaGX chips for
mobile computers. While he declined to provide
company names, Compaq Computer has been a
customer of Cyrix MediaGX chips.
"If you look at the pricing trends for batteries, panels,
processors, as well as what we're doing, you clearly see
it's possible to have very profitable $999 notebooks by
the end of the year," Norrod said.
In the first quarter of 1999, chip maker IDT plans to
release a lower-power version of its WinChip for the
sub-$1,000 notebook market, said Steve Eliscu, IDT's
director of strategic marketing. Eliscu declined to name
any participating vendors.
"Up until now we haven't put a lot of focus on [the
low-end mobile market]," he said, "but next year we'll
be putting a lot of focus on it."
In response to the new competition, Intel is expected to
release a mobile cached Celeron chip for the
sub-$1,500 category in the first half of 1999.
Cameron Duncan, a PC industry analyst with ARS in
Irving, Texas, said the new Celeron may arrive sooner.
"I think the momentum is heading downward," he said.
"We're going to see more pricing in that direction."
Other challengers to Intel's mobile CPU hegemony
include AMD and Rise Technology.
AMD last month introduced a 300-MHz K6-2 for
notebook PCs that sells for $229 in volume quantities,
compared to $637 for Intel's 300-MHz Pentium II for
notebooks.
Meanwhile, Rise Technology plans to release the MP6,
its mobile chip, in the fourth quarter of this year. Joe
Salvador, senior product manager for the company,
said the chip will let vendors add more sub-$1,000
offerings to their product lines.
But fundamental issues in the notebook market could
lessen the momentum. Longer product cycles, more
expensive components, and competition among fewer
vendors have largely shielded notebooks from the
severe price drops of the desktop market.
Accordingly, Dean McCarron, an analyst with Mercury
Research in Scottsdale, Ariz., predicts a gradual price
decline. "Intel is in a majority position, so the impact of
competitors will be noticeable, but won't drive the
market toward a wholesale drop," he said. Intel
currently controls the high-end notebook market with its
mobile Pentium II chips.
Notebook PC makers, acknowledging the impact of
low-cost mobile CPUs, appear to be hedging their bets.
Terry Cronin, senior product manager for Toshiba's
Satellite notebooks, said lower-priced chips will move
the market, but declined to project future prices
because of uncertainties about the cost of other
notebook components.
Brian Dalgetty, marketing director for IBM's consumer
mobile products, said the top-tier makers will push
close to the $999 mark next year with the help of the
new processors. But, he added, price alone will not
drive sales: Notebooks below the $1,500 price point,
with performance approaching a similarly priced
desktop PC, will be key to winning customers.
IBM and Toshiba do not expect a rapid price drop;
they project a steady decline among top-tier players,
with second-tier makers maintaining roughly a $200
discount.
Toshiba's research indicates a
degradation in introductory
prices. In 1997, 60 percent of
new notebooks were less than
$2,000, but the figure climbed
to 75 percent this year. Also,
about 30 percent of
notebooks now sell for less
than $1,400, said Cronin.
According to PC Data, Reston, Va., sub-$1,000
notebooks accounted for 5 percent of unit sales in
August, compared with 1.5 percent in August 1997.
Prices on new notebooks now bottom out at $899 to
$999, for end-of-life products from such suppliers as
Fujitsu and Compaq, and store-brand notebooks such
as the Natick, Mass.-based Lap-Top Superstore's
$999 DigiBook Wizard Jr.
The sweet spot for notebook pricing remains in the
$1,500 to $2,000 range, which accounted for 40
percent of units sold in August, said PC Data. The
average price of a notebook was $1,854 in August,
compared to $2,142 in August 1997.
Perhaps the only sector where mobile units threaten to
match the drops of desktop PCs is the refurbished
market, where prices dangle near $500. Egghead's
website, for instance, sells refurbished 486-based
machines at that price.
"We have a customer base that primarily runs
[Microsoft] Word and Excel, and that's all they need,"
said Jim Kalasky, vice president of merchandising for
Egghead.com.
"At the moment, we're using Intel chips," he said.
"When the mobile Celeron comes out, I'm sure we'll
have an offering that includes it." |
