Computers: No time like the present for buyers: Cut-throat competition is still pushing down prices of personal computers. Margaret Coffey surveys the state of the market

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The Independent Online
THERE IS one golden rule on when to buy a computer. Buy it when you need it. Trying to second guess a market where prices fluctuate from week to week, but in six months will almost certainly be much cheaper than now, is like buying a secondhand car: if you wait, the price of the model you have your eye on will undoubtedly fall, but it is not much use if you are going on holiday next week.

The computer companies are engaged in a long-running price war which has brought prices down by about 40 per cent in 18 months and the trend is still downwards.

Prices of a sample of five typical PC-compatible computers sold direct, or through the pages of magazines or newspapers, fell by an average of 12 per cent between January and July, according to surveys by Personal Computer Markets, a business newsletter. However, some buyers got better bargains than others: within this period prices rose overall for three out of the seven months.

If you buy by direct mail - ordering over the telephone - the median price you can expect to pay for a PC based on a 486SX processor running at 25 megahertz with a 100-megabyte hard disk and four megabytes of ram (main memory) is about pounds 1,050 including VAT. This type of system, which should be adequate for most home or small business needs, can be found for as little as pounds 750.

A PC based on the less powerful 386SX processor running at 25 megahertz with an 80-megabyte hard disk and 1 megabyte of ram may now be sneered at by serious techno buffs, but with prices dipping under pounds 600, they can be a bargain. In June the lowest price for both these systems would have been pounds 50 higher.

The most popular reason given for price rises in some months this year has been the weakness of the pound. The components used to make up the systems are mostly imported and priced in dollars. When the pound falls against the dollar, these components cost more. Suppliers are now operating within narrow price constraints and have no choice but to pass rises on - or so the story goes. Prices also tend to go up when there is a shortage of a particular part.

One of the main reasons for prices falling is periodic 'dumping'. Selling PCs is a faddy business, suppliers are constantly shifting their product lines to make sure they offer the most popular types of system, selling off previous lines at discount prices. As a result, there may be some bargains in the near future on computers based on 386SX processors, still the largest single type sold in the UK.

We may also see bargains elsewhere in the summer months. If the pound continues to strengthen against the dollar, suppliers may take the opportunity to cut prices in order to draw more buyers in what is otherwise a slow season. (Of course, they may decide to try to lift profit margins by leaving prices as they are.)

Suppliers who take this route are likely to throw in a few sweeteners. This practice, known as 'bundling', usually means that you get software and hardware for less than the price it would cost you to buy them separately. Often the software is thrown in virtually free. Bundling is becoming increasingly popular with suppliers because it means they do not have to keep lowering prices. It does no harm to customers either - as long as you need the software on offer.

The imminent arrival of a new, more powerful family of processors from Intel, the company that produces most of the processor chips used in PC-compatible machines, may also push prices of existing products down. This may not have a huge effect at first, since suppliers like to keep prices on new technology high for as long as they can - keeping up price levels generally.

Competition between types of outlets may also maintain the downward pressure on prices. Manufacturers are desperate to sell into what they call the small/home office market. The latest tactic is to put their products in large high street retailers. Compaq, the largest of the PC-compatible competitors to IBM, for example, has just signed an agreement with Dixons; and Vobis, the German personal computer retailer, is on the verge of opening computer shops in the UK.

These groups may start to give suppliers who sell direct from magazine pages some competition on price. But at the moment, if getting the lowest price is the most important thing, the so-called 'generic suppliers', companies selling by direct mail whose names are totally unfamiliar to the average mortal, offer the keenest prices.

Computer superstores were designed to compete with these suppliers. They also allow you to choose between a wide variety of PCs and PC products in one place. You may pay about 10 per cent to 25 per cent more than you would if you bought by mail order or you may pick up a bargain.

If you do not fancy a trek to one of the industrial estates where these superstores are set up, and are put off by the callow youths who often lurk behind the computers in high street shops, you can try a bone fide computer dealer. But be warned, if you want a basic system, you may find the atmosphere a trifle heady.

Wherever you buy, it pays to shop around and compare prices. Not that it will be easy. Buying a PC is not like buying a washing machine. You may not ever find a recommended retail price against which to compare offers. Many suppliers are now so twitchy about prices that they have stopped revealing them. If you want to buy a Macintosh, for example, Apple Computer now recommends that you ring three of its dealers to get an idea of the price. It is the world's first telephone bazaar.

Margaret Coffey is editor of Personal Computer Markets, PO Box 1626, London N5 1JF, a newsletter about the personal computer business.

----------------------------------------------------------------- PC PRICES FROM DIRECT SUPPLIERS ----------------------------------------------------------------- 1993 1992 July March January June January ----------------------------------------------------------------- 486/33 (4 megabytes ram, 110-megabyte hard disk, super VGA) Median 1,129 1,215 1,237 1,697 1,934 Lowest 828 929 1,008 979 1,308 486SX/25 (4 megabytes ram, 100-megabyte hard disk, super VGA) Median 914 1,049 959 1,407 * Lowest 650 704 738 849 * 386SX/25 (1 megabyte ram, 40-megabyte hard disk, VGA) Median 590 700 674 844** 797** Lowest 478 549 549 689** 595** ----------------------------------------------------------------- NOTEBOOK PCs ----------------------------------------------------------------- 386SX (2 Megabytes ram, 60-megabyte hard disk) Median 1,147 999 1,045 1,420 1,385** Lowest 799 699 895 1,150 975** 486SX (4 megabytes ram, 80-megabyte hard disk) Median 1,225 1,270 1,600 Lovest 999 995 1,099 ----------------------------------------------------------------- * Not widely available. ** Based on the 80386SX/20. Prices include operating system: monitor, keyboard and delivery. ALL PRICES EXCLUSIVE OF VAT. ----------------------------------------------------------------- Source: Personal Computer Markets -----------------------------------------------------------------

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