Are PC makers ready to slash prices?

Normally, computer makers cut prices after the holidays. But this year shoppers may get an early present from Santa.

Softening PC consumer demand and overstocked inventories may force manufacturers to cut prices as the Christmas shopping season enters full swing.

That would be a switch. In years past, most computer price-cutting has come after Christmas.

"If (sales) stay soft, there will probably be a price move before Christmas," said Steve Baker, analyst with PC Data, a Reston, Va.-based market research firm.

The fourth quarter is traditionally the strongest time of the year for PC companies. But with consumers jittery over everything from the crazy presidential election to stock market gyrations, PC sales are weaker than normal.

Compaq Computer Corp. (cpq), one of the top consumer PC sellers, has already announced holiday-oriented price cuts. It reduced prices on Presario consumer PCs by as much as $250 on Nov. 20. A company spokesman said that further price cuts were not planned.

A spokesman at retail rival Hewlett-Packard Co. (hwp) declined to comment, citing competitive reasons.

As one might guess, price cuts are more likely to come on PCs that are selling slowly.

PC makers, for example, could afford to cut about $100 from the prices of their low-cost offerings, Baker said. Those PCs are generally priced at $600 and higher.

Price reductions on midrange to high-end PCs would be larger.

But is $100 or $200 enough to get consumers off the couch and into stores to buy new PCs? It remains to be seen, Baker said.

Low-price PC makers might also benefit from consumers' reluctance to spend large amounts of money on PCs. Most of their offerings are priced at $600 or below.

But slowing sales might not be the end of PC makers' woes. If computer makers are also saddled with bloated inventory, yet another round of price cuts could be forthcoming early in the new year.

"They may just have to lower production levels," said Bruce Stephen, analyst at International Data Corp.

Stephen Dukker, CEO of eMachines Inc. (eeee), said the PC slowdown has nothing to do with market saturation, as some analysts have offered.

"Computers have nothing to do with Home Depot announcing it's going to miss its numbers," Dukker said in a recent interview with ZDNet News.

"What's happened is that consumers, in general, have begun to check out of the marketplace. This is the soft landing (the U.S. Federal Reserve) has been talking about."

Once the economy picks up, PC sales could rebound as well, he suggested.


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