Hot on the trail of price cuts announced two weeks ago in the US by IBM, NEC and Compaq, three additional vendors have joined the war - although not all of the reductions will apply in Australia.
Digital in the US has reduced prices both on notebooks (by up to 14 per cent) and desktop machines (by 21 per cent), while Dell has passed on component cost savings to customers, slashing 16 per cent off some models of its OptiPlex range of PCs.
At Apple, some Power Macintosh 6500 models and Macintosh Performa 6400 models have had price cuts of up to 17 per cent. The Apple cuts will not be applied locally, however.
"The Apple US action is based on pricing which was done earlier than the Australian release of those products. In fact, most of those products weren't actually released in Australia," said Bill Harrington, marketing manager for Macintosh and servers.
"Our pricing is already quite aggressive, and was quite aggressive when compared to the American model. Their pricing is now coming into line with the market," Harrington added.
Digital Australia's desktop marketing manager, Phillip Patel, believes the pricing strategy it has taken in the Australian market is "really fit and competitive, while in the US it's so commercially focused they never really adopted a fierce positioning. Digital in the US is now realising that."
Until recently the US market has not forced large vendors to focus on cost efficiency. Meanwhile direct sales vendors such as Dell and Gateway 2000 have kept inventory costs down with direct and build-to-order sales models, enabling competitive pricing.
Patel told ARN that Digital Australia will drop prices due to reduced component costs. The price reductions, to be announced in the next few weeks, are not expected to go as far as the 21 per cent cuts in the US.
Price cutting by direct vendors has been a long- term strategy - companies such as Dell and Gateway have endeavoured to pass on component cost savings to the customer.
Dell Computer Australia has cut up to 13 per cent off its OptiPlex PCs, 5 per cent off selected Latitude MMX notebooks, and up to 8.5 per cent off its PowerEdge 2100 servers.
Gateway has also recently announced price drops - up to $500 off its entire range of PCs, which it says isn't a reaction to competition, but a result of savings due to price drops on Intel processors.
"We have noticed the market becoming a little bit tighter on pricing, but nothing that concerns us at this point," said Michelle Vanzella, business marketing manager for Gateway 2000.
IDC market analyst William Christie said he expects to see further reductions in the next six months. "I think the situation will become a lot more competitive - especially from the large vendors point of view - and we can expect to see some more fine-tuning of those prices," he said. Large vendors that are "cashed-up and very profitable", and can afford to, are cutting prices in order to pick up a greater market share, said Christie.