PC price cuts will continue, says Dell CEO

The PC industry appears to be shifting into a new cycle of rapid cost and price declines, Dell Computer Corp. chairman and CEO Michael Dell said at a press conference Wednesday in Hong Kong.

Intel Corp.’s profit warning last week, which sent shares of Intel, Dell and some other hardware companies sharply down, came as a result of large purchases in Europe ahead of feared component shortages, in Dell’s view. The advance buying “stole” sales volume from the third quarter, Dell said.

Looking ahead, Dell said recent capacity building among PC component makers has put supply out of balance with demand and may kick off a period of more rapid price declines. This shift would be a normal cycle of approximately three years following a period of more gradual price declines. The cycle will be good for Dell, he said.

“We seem to be entering a period of more rapid declines,” Dell said. “Its during that period when the wind is at our back,” he added.

Dell also downplayed the long-term threat to PC sales from handheld devices such as 3G (third-generation) mobile phones and PDAs (personal digital assistants).

The biggest application of 3G wireless services, which could offer throughput as great as 2M bps (bits per second) for stationary users, will be for portable PCs, Dell said. Small displays and difficult input methods will always limit the usefulness of handheld devices, he said.

“PDAs are going to have to get a whole lot more useful … before they overtake the PC,” Dell said.

However, Dell sees wireless technology as a major trend in the PC industry.

“We believe wireless will play a big role at the client side,” he said.

He would not rule out Dell selling its own brand of PDA, but with it would have to come good wireless capability in place of the typical wired PC backup model of current PDAs such as Palm Inc.’s Palm III and Palm V.

“All the PDAs on the market today that aren’t wireless are obsolete,” Dell said.

Likewise, other computing devices such as the Sony PlayStation 2 are a long way from taking the place of PCs, Dell said.

Dell, based in Round Rock, Tex., can be reached at http://www.dell.com/.