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May 27, 2006

Get out your credit card, PC prices are dropping!


Damon Darlin at the NY Times:

Lower prices are part of the natural order in the world of electronics. Sometimes, though, the slow but relentless drop in price turns into a torrent. That’s happening now in personal computers.

All right!

Prices are falling fast on notebook computers, as much as 18.5 percent so far this year, according to statistics compiled by Current Analysis, a market research firm. The bulk of notebooks now sell for less than $1,000.

The lower-priced notebooks are pushing desktop prices down, too. “I would expect even more intense price competition,” said Charles Smulders, an analyst with Gartner, another market research firm.

The pace of price cuts has accelerated because a price war has broken out that offers great benefits to anyone in the market for a PC. And that could be a pretty large market. Forrester Research estimates that 70 percent of PC’s in use are more than two years old and 90 percent of second, third and fourth computers are even older. The wars started quietly a year ago this week when Acer, a PC maker in Taiwan, re-entered the American market. The strategy was to get into the top tier of PC vendors as quickly as possible, which meant it would grab market share by keeping prices low.

Acer and other makers took business from Dell, which began to look less like the growth company that its investors were accustomed to. Dell’s response came earlier this year as it cut prices.

Intel, meanwhile, was losing a significant portion of the microprocessor market to Advanced Micro Devices. Intel’s share dropped to 77.9 percent from 81.5 percent in the first quarter of this year, according to Gartner, while A.M.D.’s market share grew to 20.4 percent from 16.6 percent two years ago. Intel is fighting to win back share, which means PC makers use the rivalry to get a price break.

There’s more in the article, but you get the idea – a number of factors have converged to push PC prices way down.

Another statistic will tell you just how good consumers have it. While the number of notebooks sold is up 37 percent, revenue growth in the period is up only 15.5 percent, Mr. Bhavnani said. Companies are making less money on each notebook. Desktop computers are literally being given away. Retailers sold 14.8 percent more of them in the first five months of the year, but revenue declined 4 percent, Mr. Bhavnani said. Half of the computers sold for less than $500.

I can testify to this myself, since I bought a sub $1,000 laptop earlier in the year and lately have seen it selling for over $100 less than the price I paid.


Posted at 1:44 pm. Filed under Bargains, Desktop PC, Laptop, Notebook

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