Editorial: How low can you go?

Editorial: How low can you go?

Breaking the $1000 notebook barrier was always going to be significant but few, if any, could have predicted it would help propel Acer to the top of the sales charts. Not only did it jump three places in a single quarter, which is pretty much unheard of in such a competitive market, but it has also come close to doubling its market share in a year.

But before we get carried away, it is important to put these numbers into perspective. First of all, let's remember that IDC tracks 'sell-in' rather than 'sell-though', which means it counts units sent to the retailers as a shipment rather than concentrating on what has been sold to end-users. The other problem with counting unit shipments is that it does not take into account the value of those sales. IDC's Michael Sager said Toshiba, for example, would have emerged with a more positive result if the analyst firm was compiling charts in dollars and cents.

Additionally, one swallow doesn't make a summer and Acer's lead, impressive as it is, seems unlikely to be retained three months from now. Perhaps I will be proved wrong but I suspect its pricing has caught HP et al on the hop and those other vendors will take steps to redress the balance.

Despite those caveats, Acer and its channel partners will be delighted to see it heading the market. The major question its success throws up is whether it is likely to start an all out price war. Acer's success will have sent shockwaves through the boardrooms of its competitors and they must now decide whether they want to rise to the challenge.

In truth, it is an unrealistic strategy for most players in the market. The whitebox builders have had price ripped out of their grasp as far as a selling point is concerned. For them, the new challenge is to offer better value for money than their branded competitors in the higher-end of the market and specialist pockets like gaming.

Sony will continue to promote itself as an exclusive consumer brand with a price tag to match, while attempting to get a slice of the style-conscious business market.

Recent entrants such as BenQ and Samsung also look extremely unlikely to get dragged into an entry-level fight for market share.

All of which leaves us with the big five. Acer has made its intentions clear and looks likely to be taken to task by HP and Dell. IDC's Sager ruled out Lenovo, suggesting it might dabble at the bottom end of the market in developing countries such as India and China but was unlikely to cheapen its ThinkPad branding in a developed market like Australia.

The wild card is Toshiba, which has a broad enough set of models and channels to take up the challenge if it feels inclined to do so. While it will be very reluctant to let too much of a gap appear between its entry-level pricing and that of Acer or Dell, I suspect Toshiba will not follow the downward pricing trend as religiously because cost is not a central part of its armoury.

Whether a price war breaks out will largely determine just how quickly the cost of an entry-level notebook drops significantly below $1000. A quick visit to the website of US discounter, Wal-Mart, showed it is now offering a 1.6GHz AMD Sempron 2800+ HP Pavilion with 15-inch screen for $US688. Another model, from IC Power, was available for less than $US600. I wonder what the margin is on those machines.

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