Dixons accused of PC profiteering on computers

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THE ELECTRICAL retailer Dixons fought back yesterday after Intel, the world's biggest semiconductor manufacturer, accused it of harming sales of personal computers in Britain by charging high prices.

As the spat broke out, analysts said that consumers were likely to be the winners in the opening forays of what could be a vigorous price war in the run-up to Christmas.

A spokeswoman for Intel confirmed that its chief executive, Craig Barrett, had said at an industry trade fair that "Dixons charges ridiculous margins". He was backed by Paul Otellini, vice-president of the Intel Architecture Business Group, who said: "Dixons has classic channel presence and can determine what gets sold at what price."

A spokesman for Dixons, which also owns Currys and PC World, said yesterday the group "couldn't make any sense of the comments ... Intel is interpreting its drop in market share in our stores as a problem with the market". Intel currently controls about 85- 90 per cent of the chip market but is facing strong competition from another manufacturer, AMD, which introduced its K6 chip this year.

But the Consumers' Association said the public should be "concerned". "There appears to be more evidence to support our concern that UK consumers are getting a raw deal," said Phil Evans, senior policy researcher at the association.

"Dixons controls over half of the high street distribution of PCs and they seem to be using this enormous market power to keep prices to consumers high." He called for the competition authorities to "look closely at Dixons' monopoly position in the high street".

Dixons responded by saying that its share of the domestic market overall is 15 per cent and added that it introduced a PC for under pounds 500 last month. "The market is extremely competitive and the UK consumer is getting good value for money," a spokesman said.

Peter Day, an analyst at the Woking-based Inteco Corporation, said that at present the UK consumer was paying on average pounds 1,230 for a computer, the French consumer about the same but Germans pounds 950 on average. "The major reason is that the UK is still a high- income market and can bear higher prices," he said.

"The UK is also more dominated by known brands whose prices are high. In Germany there are local low-cost assemblers who put out PCs without brands on." There had been a boom in demand for PCs over the past six months and that was bound to bring down prices.

Howard Davies, senior partner in Context, a PC market research group, said that there had been a change in the market since other competitors had come in. Tesco recently began selling PCs at pounds 699 and pounds 899 and a spokesman said it was considering bringing in other models. "We can't promise anything but we are looking at it," he said. Asda announced this week that it was going to sell a pounds 499 PC.

"It's good news for consumers," Mr Davies said. "There's already signs of price-cutting and before Christmas prices will go down further - probably another pounds 100."