Computer, Accessory Prices Take a Cut for Buying Season
PERSONAL-computer manufacturers are at it again. They're lowering prices in expectation of a heavy holiday buying season.
And it's not just the cost of the computer itself that's coming down. In a rare lock step, computer peripherals such as printers, CD-ROM players, and monitors are also moving down the same price curve.
The result? For the rest of the year, consumers can expect price declines of anywhere from 4 percent to 13 percent for computer systems, according to International Data Corporation, based in Framingham, Mass. And several computer peripherals have become suddenly less expensive.
''You're getting more bang for your buck,'' says John Murphy, editor of the PC Street Price Index, based in Gibbsboro, N.J.
Take printers. At the beginning of the year, the price of a full-color ink-jet printer stood at $600. In recent weeks, intensifying competition and the entry of new companies in the ink-jet market have forced prices down to $500, and they're dropping fast, says Charles LeCompte, editor of The Hard Copy Observer, a Newton Highlands, Mass., publication that follows the printer industry. For the last couple of years, the cheapest laser printers cost $500. All of a sudden, they're $400.
A similar pattern has happened in CD-ROM players. Market leaders Panasonic Company and Sony Electronics have boosted their manufacturing capacity, putting a squeeze on prices. A double-speed player, which averaged at wholesale about $105 in May, had fallen to a range of $82 to $85 by August.
Price cuts encourage upgrading
Sometimes, the price drops merely push consumers to upgrade to better technology. This appears to be happening in CD-ROM players as sales of triple-speed and quadruple-speed models begin to come on strong. ''You can expect six-speed and eight-speed [models] next year,'' says Jim Porter, president of Disk/Trend Inc., a Mountain View, Calif., research firm.
The same holds true for computer disk drives, he adds. In 1993, the biggest selling drive was 170 megabytes. This year, consumers are snapping up, for the same price, drives that average 240 megabytes or so. Next year, they'll be able to buy 340- or even 420-megabyte drives for the same price.
The pace of the disk industry's technology improvements has actually picked up. From the mid-1950s to about 1992, the amount of information a single disk could hold increased some 30 percent every year, Mr. Porter says. Since 1992, the increase has been 60 percent a year, and that trend will likely continue for the rest of the decade, he adds.
Computer monitors are also getting bigger. Prices have dropped so that 15-inch displays have taken over from 14-inch models as standard equipment for computer systems. Even 17-inch computer monitors have fallen under the $1,000 barrier, creating strong demand in recent months.
Some of the fiercest competition continues to take place in microprocessors, the chips that do most of a computer's calculations.
Industry leader Intel Corporation faces rivals on two fronts. Clonemakers have successfully copied the functions of Intel's 486-class chip. Meanwhile, Motorola, Apple Computer Inc., and International Business Machines Corporation are pushing a competing standard called the PowerPC. So Intel has dropped prices on its speediest chips, the Pentium, to get consumers to adopt technology that has not yet been cloned successfully.
When Pentium sales didn't meet internal projections, Intel dropped prices in July and again in August. The impact on prices has been spectacular. The average entry-level Pentium machine has fallen $700 since the beginning of the year to about $2,790, according to IDC. By year's end, it should fall another $300, IDC forecasts.
This move up the technology curve has put computermakers in a bind. Companies such as IBM have had to slash prices on their older machines to get rid of the stock. At the same time, they're having to increase manufacturing capacity to produce the newer models.
Compaq Computer Corporation, for example, has built up an inventory of both kinds of machines, analysts say, which means that the company will have to make big cuts on its older machines.
Last month, Compaq cut prices on selected models by 22 percent, a move that was quickly followed by IBM, Digital Equipment Corporation, and other computer companies. Many analysts say these moves represent normal adjustments rather than the outbreak of a new price war.
''I don't like that phrase,'' says Robert Corpuz, an industry analyst with Dataquest, a San Jose, Calif., research firm. The current marketing battles represent more of a price skirmish than the big price drops of 1992.
The threat still looms, however. IBM is preparing to launch in a couple weeks a line of home computers under a new name: the Aptiva. Analysts expect aggressive pricing.
''If IBM fills the channel with a new product, and it's priced low, that certainly will instigate another round of price cuts,'' says IDC analyst Brian Clarke. ''It won't take much.''