Computer<< Prices Drop as Even Better Deals Are Planned
>
> BY DAVID HAYES, THE KANSAS CITY STAR, MO.
> Knight-Ridder/Tribune Business News
>
> Aug. 14--It's almost like one of those TV commercials, the ones where
price
> cards drop as you watch, all backed by the slogan ``watch for falling
> prices.''
>
> Except, in this case, it's really happening. If you listen carefully, you
> can almost hear the whistling sound of falling >>computer<< prices at
area
> retailers, or at direct-sales companies such as >>Gateway<< 2000.
>
> Sparked by lessening demand and cut-rate sub-$1,000 >>computers<<,
personal
> >>computer<< prices are diving faster now than ever. The average
> >>computer<< purchase in May was about 22 percent less costly than a
> similar purchase 16 months earlier, according to a report from
>>Computer<<
> Intelligence, a La Jolla, Calif., market research firm.
>
> And the price cuts aren't a sign of less for less. The average
>>computer<<
> bought in May was substantially more powerful, with better features, than
> those bought in early 1996.
>
> One manufacturer even is offering a >>computer<< with a Pentium 200 MMX
> chip and a variety of bells and whistles for $999 -- although that price
> doesn't include the monitor.
>
> But that doesn't necessarily mean that this is a good time to pull out
your
> checkbook or credit card.
>
> Intel Corp., which dominates the market for the microprocessors, the
> central processing units which supply the brain power for personal
> >>computers<<, has announced two big price cuts for later this year that
> will reduce >>computer<< prices even more. It's an important step because
> the processor, a flat >>computer<< chip that sits on a >>computer<<'s
> motherboard, is one of the most expensive components in a >>computer<<
and
> directly affects its retail price.
>
> This month, Intel plans to reduce prices on some Pentium processors by 52
> percent, which will bring the wholesale price of a 200 megahertz chip to
> about $115. That's a price cut of more than $120.
>
> And Intel isn't limiting the price cuts to the older-model Pentium chips.
> The company also is cutting its prices on Pentium MMX chips, introduced
in
> January, which include special features to enhance multimedia
capabilities.
> A Pentium 166 chip built for MMX will drop from $255 to $135.
>
> That means prices from major manufacturers, such as >>Compaq<<, Dell and
> >>Gateway<< 2000, could drop an additional $200 to $300 by late August,
> when >>computer<< sales spike slightly because of new models and
> back-to-school purchasing, said Ashok Kumar, an analyst with Southcoast
> Capital Corp. in Austin, Texas.
>
> But to get an idea of what's really going on, consider this: Intel
already
> has cut the price of Pentium chips once this year. The Pentium 200 chip
> that will cost $115 later this month was $498 only 10 weeks ago. It's a
77
> percent reduction in less than four months.
>
> Consumers have been seeing a result of that cut.
>
> Prices of >>computers<< with 200 megahertz chips have dropped about $200
in
> the last three months, said Jim Smith, manager of the >>Computer<< City
> store in Overland Park, Kan.
>
> In March, an average >>computer<< sale at >>computer<< retailers and
> superstores was $1,410, an all-time low, according to surveys done by
> >>Computer<< Intelligence. The company compiles its figures by surveying
> 1,100 retail stores each month nationwide and averaging all sales
together.
>
> But the price cuts won't end this month. Even before the first reductions
> hit the market, Intel said it would cut prices on Pentium chips again in
> November. The size of the price reductions hasn't been announced, but
> industry analysts said the cuts would be at least an additional 10
percent.
>
> ``We haven't made any decision'' on the November price cuts,'' said Intel
> spokesman Howard High.
>
> It's not only DOS-based systems that are getting less expensive. Apple
> Macintosh systems also are dropping in price. A Macintosh system with a
225
> megahertz processor, monitor and printer costs about $2,900. The price of
a
> comparable system was about $900 more a year ago, said Smith, at
> >>Computer<< City.
>
> ``I think that market's going to come back for Apple,'' Smith said.
> ``People who are multimedia-based are very reluctant to switch.''
>
> Some of the recent price cuts are a result of Intel's new Pentium II
> microprocessors, a new generation introduced in May. But analysts say the
> reason for the cuts runs deeper than just a new product overshadowing an
> older one.
>
> Intel is facing serious competition for the first time from chip makers
> Advanced Micro Devices and Cyrix. Both are marketing chips that offer
> features similar to the Pentium's at lower prices.
>
> And there's also the issue of saturation.
>
> According to a report from >>Computer<< Intelligence, household PC
> penetration rose above 40 percent for the first time in 1996. More than
40
> million U.S. households now own PCs.
>
> That number is even higher in households with children. For the first
time,
> there are more families with >>computers<< than without them -- more than
> 50 percent of households with children own PCs.
>
> ``Clearly the demand is not there to absorb the supply,'' said Kumar, the
> analyst.
>
> At least one element forcing prices down is a new marketing strategy to
> push low-priced >>computers<< -- they're often billed as ``sub-$1,000
> >>computers<<'' -- into the homes of first-time buyers and longtime users
> alike.
>
> The trend started last year with a >>computer<< made in Kansas City, Mo.,
> by Phelps Technologies for Altanta-based Monorail Inc. When they were
> introduced in November, the new-look >>computers<< initially offered
> Pentium-speed processors and a compact box and screen for $995. The price
> on Monorail's entry-level model has since dropped to $799.
>
> Other companies followed quickly. Now at least four major manufacturers
and
> many smaller, off-brand companies offer >>computers<< at $1,000 or below.
> They're going both to first-time buyers who have been unwilling to pay up
> to $2,000 or more for a >>computer<< and to families with children
looking
> to add a second >>computer<<.
>
> But despite the lower prices, consumers aren't necessarily lining up to
buy
> them.
>
> ``We don't do a whole lot of business in that market,'' said Jim Smith,
> manager of >>Computer<< City in Overland Park. ``It seems as if there's
> been a little more reluctance to purchase in that area.''
>
> However, Jim Skinner, chief financial officer for CompUSA, said the
> introduction of the low-priced models has opened up a new market. He said
> the >>computers<< are bringing a different clientele into CompUSA stores.
> The store's typical customer has had an average family income of $75,000.
> The sub-$1,000 >>computers<< are drawing customers with average incomes
of
> $55,000 or less.
>
> ``I think they've been selling pretty well,'' Skinner said.
>
> Matt Sargent, an analyst at >>Computer<< Intelligence, said the
> under-$1,000 >>computers<< gave the >>computer<< market a jolt earlier
this
> year.
>
> But consumers need to be alert: Not everything is what it appears to be
> when you're looking at the price.
>
> Although >>Compaq<< >>Computer<< and Packard Bell-NEC both promote their
> >>computers<< as sub-$1,000 systems, until recently those prices didn't
> include a monitor. And some still don't.
>
> >>Compaq<< >>Computer<<'s Presario 2200 carries a suggested price of
$999.
> It does come with a monitor, and a sleek black box with a 180-megahertz
> processor, 16 megabytes of RAM, an eight-speed CD-ROM, audio system and a
> large hard drive. The >>computer<< sells for $799 without a monitor.
>
> >>Compaq<<'s 4504 series retails for $999, but without a monitor. The
> >>computer<< includes full video capabilities, a Pentium 200 chip, 32
> megabytes of RAM and an even larger hard drive.
>
> Packard Bell's C115 multimedia PC features a Pentium 120 chip, a large
hard
> drive and CD-ROM, but it also comes without a monitor, for about $995.
The
> C115 was the top seller in February in PC superstores, according to
> >>Computer<< Intelligence.
>
> The local contender in that price class, made by Phelps Technologies, is
> the Monorail 7333. The compact one-piece unit sells for $999 and includes
a
> 133 megahertz processor, audio, CD-ROM and 16 megabytes of RAM. The
> monitor, a flat-panel display similar to those used in laptop
> >>computers<<, is built in.
>
> If you're waiting for prices to drop more, spend some time learning about
> >>computers<< until you decide that the time is right to buy.
>
> But if you do decide to buy now, remember that most local >>computer<<
> stores offer a 30-day guarantee. If you see the same >>computer<< at a
> lower price within 30 days, most local stores will refund the difference.
> Consumers often take >>Computer<< City up on that offer, Smith said.
>
> ``Whether it's $1,500 or $2,500, that's a major purchase for any
> household,'' Smith said. ``When a price drops $100, that's a lot of
> money.''
>
> When thinking about a new >>computer<<, consider some of these issues:
>
> -- What do you need?
>
> Think about how you'll use a >>computer<<. Looking for a machine to track
> your finances and write some letters? Then a low-end PC with 16 megabytes
> of RAM will do the job. Consider a 14-inch monitor and a standard
> black-and-white printer to cut costs. An older-model used >>computer<<
> might even do the job.
>
> But if you're looking to surf the >>Internet<< and play games, look at
> faster Pentium >>computers<< equipped with MMX chips and 32 megabytes of
> RAM. A 15- or 17-inch monitor will make your >>computer<< time more
> enjoyable. A color printer might be necessary to print some Web pages. A
> 28.8 bps modem or faster is a necessity.
>
> If you're planning to do some graphics-heavy, desktop publishing,
consider
> an Apple Macintosh with plenty of RAM and a fast processor.
>
> -- Processing speed is everything, or is it?
>
> Not necessarily. Always buy the fastest central processing unit your
budget
> can handle, but not necessarily at the expense of extra RAM.
>
> The Pentium-class 133 megahertz processors and comparable chips for Apple
> >>computers<< will run most programs well. Speed may mean more for games
> players, who should consider MMX-capable processors.
>
> -- Stock up on RAM.
>
> Random access memory is used to run your programs, whether they're stored
> on your hard drive or run off a CD-ROM drive. RAM, often referred to as
> memory, is no place to be stingy. Sixteen megabytes is the minimum
> necessary to run today's complex >>computer<< programs, including
> >>Windows<< >>95<<. If your budget is tight, you can add memory later
> easily if your machine is upgradable.
>
> -- There may be less to see later this year.
>
> >>Computer<< stores are expected to cut back on the number of models they
> carry because of expected lower demand. Best Buy plans to reduce its
> inventory from 31 models to 24.
>
> It's an industry-wide trend, said Smith, at >>Computer<< City.
>
> ``More and more the thought has been `do you need 40 to 50 (units), or
will
> you confuse customers less by offering 26 to 30?' ``
>
> -- Toys and gadgets will add to the price.
>
> The >>computer<< is just part of the equation. If your system doesn't
come
> with a modem, budget for that if you plan to access the >>Internet<< or
> >>on-line<< services. Think about the type of printer you'll need. Will
you
> use a color printer often enough to justify the extra $50 to 100 cost?
>
> And then there's >>software<<. Once you buy that new machine, you're
going
> to want some toys to play with. Many >>computers<< come loaded with
> programs; others do not. Either way, assume that you're going to want to
> buy a couple of >>software<< programs. The average cost for games is $20
to
> $45.
>
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>
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>
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>
>
>
> (c) 1997, The Kansas City Star, Mo. Distributed by Knight-Ridder/Tribune
> Business News.