Compaq slashes computer prices

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The Independent Online
COMPAQ, the Texas personal computer maker, cut prices yesterday for the fourth time in a year, reducing the cost of its desktop PCs by 15 per cent and its notebook models by 9 per cent.

A number of PC makers, including Japan's NEC, NCR and Unisys, responded with similar cuts, but analysts said it was too early to say whether Compaq's aggressive move will set off a more general price war among leading competitors such as IBM and Dell. The industry believes that PC prices will fall another 35 per cent in 1993 after a similar decline last year.

Dell did, however, take advantage of yesterday's well-publicised event to steal some of Compaq's thunder, introducing two new multi-media PC systems to compete with the new Prolinea CDS.

This computer, integrating a CD-ROM player and sophisticated sound capability, will sell for less than dollars 1,700 in the US, while Compaq's cheapest desktop PC equipped with a 386 microprocessor will sell for dollars 750 without a monitor.

Compaq, the industry's lowest- cost producer, has now cut prices by 70 per cent since last June, reducing the profit margin of smaller clone makers to almost nothing.

But Eckhard Pfeiffer, the chief executive, said yesterday that the company was moving away from pure price competition and planned to start marketing its products on service and quality considerations.

'There was in the last two years this idea that a box is a box is a box. Now you have to have your company better positioned,' he said.

March is a traditional time for PC makers to adjust prices and many are simply trying to clear inventories of older 386-powered machines before the arrival later this year of a new top-end chip, Intel's Pentium processor.

The price wars of the past two years have become a source of concern on Wall Street, as analysts wonder whether higher sales volumes among the PC makers will continue to offset lower margins.

But Compaq and Dell are the likely beneficiaries of the eventual shake-out. In midday trading, Compaq shares were up 1 1/8 at 45 5/8 .

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