Date: Fri 26-Jun-1998

Publication: Bee

Author: CURT

Quick Words:

iinfo-computer-prices-Dell

Full Text:

INTERNET INFO FOR REAL PEOPLE: PCs on the Cheap

By Bob Brand

All PC prices have dropped dramatically. Not only that, but the speed and

capacity of these low cost systems have improved as well. Pick up almost any

newspaper and you will see ads for sub-$1,000 computers. When you read the

fine print, you discover that the monitor may not be included in the price.

Even that is changing.

At the end of May, Packard Bell announced a $699 computer. This system has 24

MB ram, 2.1 GB hard drive, a 24x speed CD ROM and a 56k bps modem. However, it

contains a Cyrix processor (an Intel Pentium clone), which keeps the cost

down. IBM, Compaq, Hewlett Packard, and Gateway offer slightly higher priced

computers with Pentium processors. Usually, these computers come with Windows

95 installed, but may provide a free upgrade to Windows 98.

Frankly, all these systems offer outstanding value. The wide choices of

processor speed, disk capacity, modem speed, and other features can overwhelm

a first time computer buyer. However, many people are now buying their second

or third computer and have a better idea of cost/performance tradeoffs in the

myriad of offers.

The Leader

Major forces driving down the prices and increasing the value can be

attributed to several important factors. The commodity nature of computer

components and the rapid evolution of performance improvement drive prices

lower and lower at the retail level. When a new model becomes available, the

older units must be discounted in order to make room for the newer

replacement.

In the case of Dell Computer, the computer is assembled only after the order

is received, often relayed over the Internet. With no computers in a

distribution pipeline, Dell not only enjoys a lower unit production cost, but

quickly passes along lower component costs to their customers.

Essentially, Dell sells at the wholesale price. Moreover, prices keep

dropping. Dell's competitors are forced to either follow or lose sales.

Frankly, it must be driving Dell's competitors crazy because their

manufacturing/distribution systems are not nearly as streamlined. They have

higher costs.

The Big Payoff

For their recently completed first fiscal quarter 1999 on revenues of $3.9

billion, Dell earned $305 million as reported by Wired Magazine. Dell

announced Internet sales placed by buyers using their website now exceed $5

million a day. No other computer manufacturer comes close to this performance.

Any computers in the distribution chain of non-Dell manufacturers drop in

value even faster than Dell lowers prices. As a result slightly older units

are sold by discount sellers such as Jem Computers. By offering a combination

of new non-Dell equipment and refurbished slightly older units, these computer

sellers must also reduce prices in order to keep inventory levels to a bare

minimum.

Jem Computers has a "basement" area where hardware is put on a timed discount

schedule for rapid movement. Patient buyers can watch as prices drop and take

advantage of important savings in a marketplace that has notoriously thin

profit margins. I have purchased several computers this way with satisfying

results.

It Will Continue

Recently, Intel announced a new 64-bit processor, code named Merced, will be

delayed by six months. While this new class of chip will not appear until late

1999, anticipation of its arrival will exert continued pressure to reduce the

prices of Pentium MMX and Pentium II class chips (and their competitors)

currently being sold at premium prices. You can be assured that whatever

computer you purchase today will be worth a lot less next week or next month.

However, if you are thinking of buying your first computer or your third, you

receive a lot of computer for your money.

URLs (Uniform Resource Locators) of interest:

http://www.dell.com/

http://www.jembasement.com/

http://www.wired.com/news/news/business/story/12564.html

(This is the 109th of a series of elementary articles designed for surfing the

Internet. Next, "4th of July" is the subject on tap. Stay tuned. Until next

week, happy travels through cyberspace. Previous issues of Internet Info for

Real People (including links to sites mentioned in this article) can be found:

http://www.thebee.com. Please e-mail comments and suggestions to:

rbrand@JUNO.com or editor@thebee.com.)