Newspaper article The Christian Science Monitor

Price War May Transform the Computer Industry Weak Personal Computer Market and Cheaper Semiconductors Are Giving Aggressive Edge to Competition between Computer Manufacturers

Newspaper article The Christian Science Monitor

Price War May Transform the Computer Industry Weak Personal Computer Market and Cheaper Semiconductors Are Giving Aggressive Edge to Competition between Computer Manufacturers

Article excerpt

THESE days, even the computer ads look like clones.

"New Lower Prices." "Grand Slam Savings." "Prices Cut Again!" they scream. The August edition of Computer Shopper, an industry catalog, confirms what everybody already knows. Personal computer (PC) manufacturers are waging a price war. If it continues - and virtually every analyst expects it will - the industry will take on a radical new look.

All this is good news for the consumer.

Solidtech Inc., a small vendor in Scotch Plains, N.J., has cut prices by $20 to $350 since May. Gateway 2000, a feisty South Dakota vendor, sold its 486SX-25 model for $2,395 in May; now, it is $1,895 (albeit with a smaller hard-drive).

"Competition is pretty tight out there," says Kris Montoya, sales manager for Centrix Computer Inc. in Industry, Calif. The vendor sold a top-of-the-line 486-50 personal computer for $2,745 in May; today, it is selling for $2,515 with a free bundle of software thrown in.

John Murphy, who publishes the PC Street Price Index, calls it the most precipitous price-slide he has seen. "We've got competition all over the place," he says.

One reason is the price cutting among semiconductor manufacturers. Late last year, Intel Corporation sold its 486SX-25 microprocessor for $333 apiece (in quantities of 1,000). Today, it is $119, Mr. Murphy says.

The bigger reason for computer discounting is the weak personal computer market. Instead of the double-digit growth the young industry enjoyed in the 1980s, growth in unit sales has slowed in the '90s. Bruce Stephen, director of PC hardware research at International Data Corporation, predicts unit sales will be up only 5 percent this year. Prices have dropped so far that total sales in terms of dollars will actually fall 2 percent.

"The PC market is maturing," he says. "There's less opportunity for growth.... The reality is that the companies who are operating on shoestrings or are particularly exposed and battered by market conditions will probably either retreat from the market or, in the worst-case scenario, fold up their tent."

Industry executives agree.

"I see a big shakeout in this industry coming," says Bill Hayden, chairman of CompuAdd Computer Corporation. …

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