Don't call it a price war, say axe-wielding vendors

Is there a commercial desktop price war going on? PC companies might shrink from the words, but left, right and centre they're announcing large price cuts - and the trend should continue as competition from direct-sales juggernaut Dell Computer spurs the major vendors to cut prices and refine their distribution models.

Is there a commercial desktop price war going on? PC companies might shrink from the words, but left, right and centre they're announcing large price cuts - and the trend should continue as competition from direct-sales juggernaut Dell Computer spurs the major vendors to cut prices and refine their distribution models.

Both Compaq and Hewlett-Packard cut prices last week, and both companies’ American headquarters cited Dell as the impetus. IBM also is expected to make a move soon, signalling good news for all PC buyers.

Compaq announced two new ranges of Deskpro, its business desktop model, and announced it had cut prices across the Asia Pacific region by as much as 15%. An entry level Deskpro 2000 PC with a 166MHz Pentium chip, 1.2 Gb hard drive and 16Mb RAM has a suggested retail price of $1,855.

“We looked around when setting pricing and we are competitive. I don’t think there was anyone lower than us when we set the pricing for the Deskpros,” said Compaq PC products business marketing manager George Hladilo at a press launch for the Deskpro 2000 and 4000 ranges.

The Deskpro 2000 models range from $2,255 to $3,655 and the Deskpro 4000 models range from $2595 to $3,895. All the new models have MMX Pentium chips ranging from 166MHz to 233MHz and Compaq says most of its new models will be following suit in line with Intel’s move to MMX technology.

Compaq marketing director Tony Lambert says there is not a price war going on, but rather “a battle for the customer dollar”.

Lambert says the “price realignments” are due to Compaq’s distribution model which has led to savings for its customers.

“The price actions are due to Compaq changing its distribution model which has allowed us to make more computers.”

Compaq has a warehouse in Auckland, another in Sydney and a manufacturing plant in Singapore. The Sydney and Auckland warehouses were set up to enable faster delivery of computers to New Zealand customers in order to compete with direct model companies such as Dell.

Lambert says Compaq’s price cuts are not solely aimed at Dell.

“They are against all suppliers but with a particular focus on direct factory suppliers. It's a battle for the customer dollar which we are doing in a number of different ways - pricing, marketing methods and promotions.”

Hewlett-Packard, which, in a pre-emptive strike announced its own price cuts just days before Compaq, says it has slashed prices by as much as 24 percent across its entire line of Vectra corporate PCs.

However HP in New Zealand says the price cuts are not due to competition with Dell but a response to Intel’s plan to drop its prices on processors on August 1.

HP, which wants to become a top five player in the PC market by the next century, says in its publicity that its pricing is a “push to put leading edge PC technology into the hands of corporate and small business customers at mainstream PC prices.”

Also announcing price cuts of up to 12% but maintaining it has nothing to do with the competition was Digital.

Pricing on the Venturis FX-2 base unit (which needs memory, a hard drive and a monitor added to it) dropped from $1,305 to $1,149. For the Venturis 5166 which has 16Mb of Ram, a Pentium chip, a 14 inch monitor and a 1.2Gb hard drive, pricing dropped from $2,395 to $2,299. For a machine with the same specs except with a 133 MHz Pentium the price dropped from $2,124 to $1,949.

Ken Olsen from Digital says the company is doing price cuts on a monthly basis in order to give customers the best value in relation to market pricing.

“The price cuts are not a response to other companies cutting prices, we price our machines where we think the customer will benefit.”

Olsen says the cuts are not related to Intel’s expected lower pricing in August either. “We will wait and see what happens and then we’ll announce our cuts in August.”

Dell Computer announced its own price cuts for New Zealand late Wednesday.

The company which has other computer vendors worried because of its direct selling method upped the ante and cut its own prices.

Dell Computer announced price reductions across its entire product range, including cuts of to 12% from its line of network-ready OptiPlex corporate desktop PCs; 5% from its Latitude LM166ST MMX notebook; and up to 10% from its PowerEdge 2100 server. The price cuts, effective immediately, are Dell's third since January, with prices on some products having dropped as much as 21% since the beginning of the year, according to Dell.

Dell New Zealand’s general manager Ross Allan cited component pricing drops as the reason for the price reductions.

He also singled out Dell’s build-to-order direct selling strategy as the main reason behind the company’s ability to pass on lower costs to customers and vowed to continue making inroads to the New Zealand corporate PC market.

In the United States IBM has also announced price cuts of up to 20% on its 300 GL desktop series and its Thinkpad notebooks. IBM New Zealand were unable to say if the cuts would also apply here. An IBM spokesperson did confirm that pricing for consumer and commercial desktops in the Asia Pacific region was being reviewed and that IBM expected to stay price competitive.

Commercial desktop pricing: falling in line

HP

Vectra XA/Pentium MMX/166 MHz/16Mb/1.6GB

$2,350

Vectra VL/Pentium MMX/233 MHz/32Mb/2.5GB

$3,530

Compaq

Deskpro 2000/Pentium MMX/166MHz/16MB/2.1GB

$2,700

Deskpro 2000/Pentium MMX/233 MHz/32Mb/3.2GB

$3,960

Dell

OptiPlex GsL5166/Pentium MMX/166MHz/16Mb/2 GB

$2,225

Optiplex Gxi/Pentium MMX/233 MHz/32Mb/2GB

$3,675

Digital

Venturis 5166/Pentium/166MHz/16Mb/1.2GB

$2,299

All prices suggested retail and ex GST.

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