Digital joins price campaign: Cost of PCs reduced by up to 26% in escalating contest

NEW YORK - Digital Equipment, jumping into a round of deep price cuts by US personal computer makers, said yesterday that it would reduce the cost of buying PCs equipped with 486 and Pentium processors by up to 26 per cent, writes Larry Black.

'The new prices make Digital extremely competitive as buyers move to higher-performing PCs,' the company said.

The move follows similar price cuts, first by Compaq last week, and then by International Business Machines on Wednesday. Some analysts expect other leading manufacturers such as Apple, Packard Bell, and Dell to follow suit, and predict a second volley of cuts from Compaq and IBM.

Others are sceptical about the motivation for the cuts, challenging the notion that PCs will soon be the subject of another price war. They argue that most of the companies have large inventories they hope to clear before beginning the crucial fourth quarter, when PC makers do as much as 60 per cent of the year's business.

The price of a state-of-the-art PC system has been remarkably stable for the past year and a half, although the price of any particular model has fallen quickly as it has been overtaken by faster rivals. But memories of the ruinous price wars of 1992, led by waves of cutting by Compaq, are still fresh for manufacturers.

Wall Street reacted positively to Digital's announcement, pushing its shares up another 1/2 to 24 3/4 a day after rumours of heavy buying by a California turnaround specialist caused their price to jump almost 4 per cent.