Message-Id: <55206A473154D011924D0020AFF7ACB56A6513@mail1.oulan.ou.edu>
Date: Wed, 18 Mar 1998 15:40:45 -0600
From: "Swisher, Bob" <bswisher@ou.edu>
To: "'it-fyi@listserv.ou.edu'" <it-fyi@listserv.ou.edu>
Subject: Backlogged Compaq cuts prices (news.com)
This NEWS.COM (http://www.news.com/)
Backlogged Compaq cuts prices
By Brooke Crothers
March 18, 1998, 12:55 p.m. PT
http://www.news.com/News/Item/0%2C4%2C20187%2C00.html?sas.mail
Compaq Computer (CPQ) has cut prices on business PCs and is offering
free monitors in the face of mounting price competition and high levels
of chip and computer inventories.
The company has also announced a trade-in program for servers and
workstations.
The dual initiatives follow recent price cuts and promotions on
Compaq's Armada notebook PCs, ProLiant servers, and workstations.
The action is designed to reduce inventories of systems with Intel's
Pentium MMX chip that are building as computer manufacturers make the
switch to the newest Pentium II processors, according to resellers and
analysts.
Seven of the largest distributors--the companies who move computers
from Compaq to smaller regional resellers--have about 150,000 Pentium
and Pentium MMX units in inventory, said Cameron Duncan, PC industry
analyst with Associated Research Services. That is twice large as the
combined inventories of IBM and Hewlett-Packard, which are also looking
to reduce stockpiles as well, he added.
Prices on the flagship Deskpro business line were cut up to 11
percent, with desktop PC prices starting at $859. Monitor prices were
reduced as much as 15 percent.
"Compaq was on a run rate in the forth quarter that was strong, and
they continued pumping out systems assuming that they were going to
increase market share and sales," said Norm Bogen, senior analyst with
market research firm In-Stat.
"But our opinion is that overall market is slowing down slightly.
Worldwide PC market growth in '97 was 16 percent, and that will slow to
about 13.5 percent for this year. It's not a dramatic drop, but Compaq
was on a growth path," he added.
Compaq is also offering free monitors with all Deskpro 2000 models
equipped with Pentium II processors, all Deskpro 2000 SBE models, and
the Deskpro 4000S, as well as Compaq's NetPC, the Deskpro 4000N. The
promotion runs through May 31.
Prices for Compaq Deskpro 2000 models are now 6 percent to 11 percent
lower. A model with a 166-MHz Pentium MMX processor now sells for $859.
Low-end Deskpro 2000 machines with 166-MHz and 200-MHz Pentium MMX
chips constitute a large proportion of the revenue surfeit, according to
computer resellers. The size of the inventory bulge, combined with
increasingly tight product and processor cycles, will likely mean
further discounts on this class of machines at least through the first
half of the year.
"It is going to be tough at least through the second quarter," said
one reseller who requested anonymity. "Demand is there--it's just not
keeping up with supply."
Systems of this class will likely descend to $700 to $800, another
reseller said.
The Deskpro 4000 line gets price reductions from 4 percent to 10
percent. This line of network-ready PCs now starts at $919.
Monitors also fell in price, ranging from 6 percent to 15 percent,
including a LCD (liquid crystal display) flat panel monitor. Prices now
start at $269 on a 15-inch color monitor. The price of the TFT500
15-inch flat panel LCD display has been reduced by 6 percent and is now
available at $2,499.
On the server and workstation front, Compaq is offering a promotion
for customers who purchase ProLiant or ProSignia models. The program
will provide "one-for-one credits to customers who trade in certain
non-Compaq servers and workstations and acquire new Compaq servers or
professional workstations," the company said.
Compaq is also offering a 4.9 percent financing program for a limited
time on all Compaq PC hardware, including laptops, desktops,
workstations, and servers, through June 30. Eligible customers must
order five Compaq PC hardware units or $15,000 worth of hardware.
"We are putting in place price reductions and aggressive promotions in
the first and second quarter to reduce these channel inventories and
accelerate the implementation of our Optimized Distribution Model," said
Eckhard Pfeiffer, Compaq's CEO, in a prepared statement.
Customers are "just not flocking to systems like they were expected
to," Duncan said. An inventory glut is expected to result in price cuts
on Compaq's Presario consumer systems as well, he said.