Lower component costs, slower demand and competitive pressures all factored into a round of desktop PC price cuts announced in the US by three top PC makers.
Compaq slashed prices on one line of corporate desktop PCs by 31 per cent. Hewlett-Packard (HP) cut prices on its business desktop PCs by as much as 28 per cent, and Dell dropped prices on its consumer desktop models by 20 per cent.
This round of price cuts is a "skirmish on the outskirts of a potential price war," said Chris Murphy, an IDC analyst. "Dell has been very aggressive in pricing for the past couple of months and some of the other vendors want to keep up, as far as price perception goes," he said.
Murphy added that lower component costs have allowed manufacturers to pass savings on 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, said he agrees that reduced prices on memory have pushed prices lower, as have processor price cuts made by Intel.
"We've had a number of processor price cuts [from Intel], which allow us to continue adding value," Telaroli said.
Achim Kuttler, director of PC client business at HP, said "difficulties in the economy" and lower component costs factored into the company's decision to slash prices by 28 per cent.
Dell spokeswoman Anne Camden said the company intends to keep up the pricing pressure on the competition, within certain limits.
"Dell has said publicly since the beginning of the year that we would offer very aggressive pricing and go after market share," Camden said. "Will we be undersold? I guess a better way to put it is that we will decline to bid when a company asks for pricing that Dell does not believe is in the best interest of its shareholders."