Cheaper component costs, slower demand and competitive pressures all factored into a round of price cuts, ranging from 20 to 31 per cent, by three major PC makers on desktop models over the past week.
Compaq Computer Corp. slashed prices on one line of corporate desktop PCs last week by 31 per cent. Hewlett-Packard Co. cut prices on its business desktop PCs by as much as 28 per cent. Dell Computer Corp. dropped prices on its consumer desktop models by 20 per cent.
Chris Murphy, an analyst at International Data Corp. in Framingham, Mass., called this round of deep price cuts “a skirmish on the outskirts of a potential price war. … Dell has been very aggressive in pricing for the past several months, and some of the other vendors want to keep up as far as price perception goes.”
Murphy added that lower component costs have allowed manufacturers to pass on savings to customers. “Memory prices are particularly depressed, which translates into lower price points [for PCs],” he said.
Steve Telaroli, North American product business manager for the Compaq Deskpro line, agreed with Murphy that reduced prices on memory have pushed prices lower, as have processor price cuts by Intel Corp.
“We’ve had a number of processor price cuts [from Intel], which allow us to continue adding value,” Telaroli said. Compaq slashed prices 31 per cent, or US$577, on its DeskPro EN model with a 1-GHz Pentium III processor, 256MB of RAM and a 20GB hard drive, bringing the price to $1,283. Compaq dropped the prices on its DeskPro EX with a 1-GHz Pentium III, 128MB of RAM and a 40GB hard drive by about 21.5 per cent, or $286, to $1,102.
Achim Kuttler, director of PC client business at HP, said “difficulties in the economy” as well as lower component costs factored into the company’s decision to slash prices by 28 per cent. Reflecting that drop, the company now sells its HP Vectra v1800 model desktop PCs for $1,299, with minitower v1800 models priced at $1,349.
Dell Computer reduced prices on its Dell Dimension Pentium 4-powered PCs with a 1.7-GHz chip by 20 per cent to $1,349 and prices on a corporate desktop with a 1.3-GHz Pentium 4 to $1,199.
Anne Camden, a Dell spokeswoman, said the company intends to keep up the pricing pressure on the competition within certain limits. “Dell has said publicly