Is there a price war in the air? Industry reaction to recent PC price reductions by a number of companies including Digital and Compaq is varied. According to Mark Whittard, marketing manager at Digital, it was his company that first cut prices, "This time around we led the market with price cuts. Compaq responded to us," he said. Digital has already reduced prices by up to 20% across the board. Whittard perceives the activity of other companies as typical. "When one vendor moves all the other vendors move," he said.
Darren Besgrove, marketing manager at AST, spoke to Australian Reseller News. He responded to the recent announcement in Hong Kong which stated that AST will be reviewing prices on a worldwide scale in response to price reductions from Compaq. Although reductions of up to 21% were discussed in the Hong Kong market, Besgrove said the extent of reductions in Australia had not been decided, but predicted they would not go above 10%.
IBM has reduced prices by 12%Ð15% on its own line of Pentium PCs. Ian Bertram, commercial desktop product manager at IBM, said, "I don't believe there is a price war," but admitted, "vendors are trying to stay competitive".
Changes in distribution strategy could be one reaction from the industry if a price war does start. Besgrove believes AST, which does some of its business directly, would suffer less than companies who have a larger distribution channel. "In the end it is the dealers of larger PC companies who would be most affected," he said. Contrary to this, both Bertram, at IBM, and Whittard, at Digital, believe value added resellers are essential to successful business. Both believe the resellers' position within their distribution strategy would not alter in the event of a price war.
Farley Bartholomeusz, managing director of Packard Bell, sees no reason to reduce prices in response to Compaq. "Our products are still competitively priced," he said. Sue Sara, corporate affairs manager at Apple, said, "We are not planning any pricing action at this time." She thinks price reductions only trigger a wait-and-see effect. However, Sara did not rule out the chance of Apple reviewing its prices in the near future.
When asked what effect a price war could have on the PC industry, AST's Besgrove said: "When a full-scale war erupts the market tends to deflate." Besgrove predicts most companies will not be changing prices without careful consideration, and feels that any changes would be made "softly, softly".
Packard Bell's Bartholomeusz sees the customer as the one who would be most likely to lose in the end. When asked how smaller and struggling vendors might cope in a price war Bartholomeusz said: "If there is a price war I am sure, instead of going out of business, the manufacturer would cut corners, by cutting quality or cutting some benefit to the customer, such as service or support."