Advertisement
YOU ARE HERE: LAT HomeCollections

PC Maker Price War Expected to Create Bargains : Computers: IBM, Compaq cuts likely to spark a new frenzy, analysts say, but business clients are seen gaining the most.

August 25, 1994|KAREN KAPLAN and ROSS KERBER | TIMES STAFF WRITERS

An escalated personal computer price war, sparked by new cuts from market leaders IBM and Compaq, is expected to create more bargains as other PC makers also slash prices, company officials and analysts said Wednesday. But business customers, rather than consumers, are likely to reap most of the benefits, they said.

International Business Machines confirmed Wednesday that it would cut prices between 10% and 27% on personal computers sold to business customers. The Armonk, N.Y.-based company's decision came nine days after Houston-based Compaq Computer Corp.--the industry sales leader through the first six months of the year--dropped prices on similar models between 7% and 22%.

Analysts said they expected other PC makers to join in.

"The silly season is here again," said Ian Gilson, analyst with L.H. Friend Weinress & Frankson Inc. in Irvine, who noted that computer prices often decline at the end of the summer. "They're doing what they have to do to move products at the end of the summer doldrums, get rid of that old inventory."

Noel Djimtoloum, supervisor of Circuit City's computer department in West Los Angeles, said he expects other companies to match the lower prices, based on past experience.

Wendy Abramowitz, an analyst with Argus Research in New York, said computer makers are pushing business-oriented, high-end computers because the pace of corporate upgrading has slowed recently. Strong demand among consumers will probably keep retail prices close to their current levels for now, she said.

Compaq, with its higher profit margins, can afford a price war more than IBM's PC unit can, said Michael Kwatinetz, a PaineWebber analyst.

But Southern California computer dealers said a variety of factors affect the price of PCs on showroom floors, such as other dealers' prices and manufacturer incentives.

They also suggested it could take a few weeks for the cuts by Compaq and IBM to make their way into stores--and perhaps longer for the buying public to notice.

Tigran Tsiligian, a corporate sales account executive with Comp USA in Culver City, said his business customers are not aware of the recent round of PC price cutting until "we bring it to their attention and stick it in their face."

And consumers--conditioned to expect falling prices--said they are numb to such news and uninspired by the latest price war.

"There really is no good time to buy a computer because a price war is always going on," said Mel Gallardo, who was shopping for a computer Wednesday in Torrance.

"Everything always gets smaller, quicker, faster and cheaper," agreed shopper Betsy Baker. "When the prices drop, it just means something (better) is coming along."

Business vendors, who buy between five and 500 desktop computers at once, are usually more savvy buyers. Their tendency to buy in bulk makes them a natural target for computer manufacturers who want to move as many machines as possible before new products are introduced at an autumn trade show, analysts said.

Bob Smith, a systems support analyst for Century 21 International in Irvine, said the real estate company is taking a hard look at what new machines it might order in the wake of price cuts. Century 21 has a purchasing agreement with Compaq, he said, and bought several thousand PCs this year alone.

But Compaq's cuts now have Century 21 considering whether it should buy machines using the Intel 486 chip that it had been planning to acquire, or whether it could afford to buy computers based on Intel's more expensive, faster Pentium chip.

Advertisement
Los Angeles Times Articles
|
|
|