Computer Price Wars
Hewlett Packard, Dell, and Compaq seem to be in a
fight to the death to grab the top computer maker spot
From DIANA J. CHOYCE
May 14 - 20, 2001
If you have been considering purchasing a computer,
now might be a good time to take the plunge. Major cuts in CPU prices
and memory have dropped the overall prices. Also, computer companies
have stated that sales have been dropping steadily due to a slowing
economy and are doing all they can to increase sales. Layoffs, cost
cutting, and restructuring are being used all across the industry.
Hewlett Packard, Dell, and Compaq seem to be in a fight to the death
to grab the top computer maker spot.
In corporate sales, Compaq and HP (Hewlett-Packard)
have been lagging far behind Dell in sales and prices. They say that
is all about to change as they rev up the fight to compete with Dell.
Last week Dell announced a 10 per cent cut on Dell corporate desktops.
Following that, HP dropped their prices by up to 28 per cent, and
Compaq dropped up to 31 per cent. Dell has established itself as the
leader on price, said Chris Murphy, a senior analyst with IDC.
"Dell has been more aggressive (on price) than most of the other
guys throughout this year," he said. "What we've seen this
week is more of an evening out" of prices, Murphy said.
"These guys are catching up with Dell." Corporate prices are
not always set in stone. Most PC makers will use additional discounts
for larger orders, and add on support and other perks to lure new
customers. The price cuts stem from two areas, said Dave Zabrowski,
HP's vice president and general manager of business PCs for North
America. "Component prices continue to fall at a fairly rapid
pace," he said. "It's our intention to continue to be
competitive with our offerings."
Meanwhile, Compaq cut prices by up to 31 per cent
on DeskPro EN PCs and 20 per cent on DeskPro EX PCs, the company said.
Compaq also combined its consumer and corporate PC businesses in an
effort to cut costs. Lower costs resulting from the reorganization
helped the company reduce PC prices, said Steve Telaroli, North
American business product manager for desktops in the company's new
Access Business Group. "It's that plus passing on component cost
reductions direct from suppliers," Telaroli said. But competitive
pressures do enter into the pricing game. "We have to be able to
maintain a position out there in the marketplace," Telaroli said.
Thanks to reductions in component prices, IDC's Murphy believes that
Dell will be able to cut prices again soon. The other PC makers will
likely follow. "I wouldn't be entirely surprised to see Dell cut
prices again, but it will probably not be within the next week or
so," he said. "I think Dell can sustain a price cut of 7 to
10 per cent, but it's not likely they could do it again for another
three to four weeks," he said.
On the consumer front, top personal computer makers
Compaq and Dell are locking horns in a fierce battle for sales.
"It's not a question of whether there's going to be a price war,
we're in a price war,'' said Compaq Chairman Michael Capellas, whose
company lost the No. 1 personal computer maker position to Dell during
the first quarter. "The price war will continue,'' Capellas said
at the Merrill Lynch Hardware Technology conference. "We will be
as aggressive as anyone.'' Compaq's rival Dell will be merciless in
managing costs and will consider more layoffs, a senior Dell executive
said, as it keeps the heat on in a price war to seize market share.
"We will be ruthless in how we address our cost structure going
forward,'' said Tom Meredith, Dell's senior vice president of business
development and strategy. Meredith pointed to cost controls and
aggressive pricing as reasons Dell was able to take market share from
Compaq. Asked if layoffs could be part of that ruthless cost-cutting,
Meredith said simply, "Absolutely.'' Adding to the fray is the
fact that the top two microprocessor companies, Intel and Advanced
Micro Devices Inc., are engaged in their own price wars.