Portable Computer Price War Heats Up as Compaq and Sony Slash Prices

Strategic Insights -

The portable personal computer price war escalated over the weekend with Compaq Computer and Sony reducing the prices of their notebooks, a move that may prompt other manufacturers, including Hewlett-Packard and Toshiba, to lower their prices or offer rebates to remain competitive. Analysts predict that Compaq's aggressive pricing strategy will help the company maintain its lead in the portable retail sales market, but Sony's surprise price cuts have put pressure on the market, signaling a slowdown in notebook sales and a fierce competition among manufacturers. The price war is likely to continue, with Compaq and its competitors looking to clear out inventories before the release of Intel's mobile 1-gigahertz Pentium III processor after the holiday season.

Key Takeaways:

  • Compaq and Sony have slashed prices of their notebooks, sparking a price war in the portable computer market.
  • The price of Compaq's fully loaded 18XL390 model with 850-MHz Pentium III processor, 15-inch Super VGA+ display, 128MB of RAM, 20GB hard drive, DVD drive, 56K modem, and 10/100 networking has been reduced to $2,799 from $3,099.
  • Sony has cut the price of its Vaio XG38 and Z505LS models by $200 to $2,899 from $3,099, with an additional $100 off via mail-in rebate.
  • Analysts predict that Compaq's aggressive pricing strategy will help the company maintain its lead in the portable retail sales market.
  • The price war is likely to continue, with Compaq and its competitors looking to clear out inventories before the release of Intel's mobile 1-gigahertz Pentium III processor after the holiday season.
  • The price cuts come as Sony's sales momentum drove Toshiba's sales to fourth place, prompting Compaq's response.
  • For its part, Compaq appears ready to fight for its No. 1 standing, but softer demand may lead to stock building up on dealers' shelves.

Statistics:

  • Compaq's 18XL390 model now sells for $2,799, a reduction of $300 from its previous price.
  • Sony's Vaio XG38 and Z505LS models now sell for $2,899, a reduction of $200 from their previous price.
  • 87% of notebook buyers are expected to wait for a price drop before making a purchase (according to PC Data analyst Stephen Baker).
  • Compaq and its competitors may sell as much as 20% to 30% more units at reduced prices.
  • The mobile version of the 1-gigahertz Pentium III processor is expected to be released by Intel sometime after the holiday season.

Sources:

  • Times files
  • Gartner Group Inc.
  • PC Data
  • InformationWeek