Majestic Research

Red Orbit

Cheap PC Offers For Frugal Shoppers

Published: October 22, 2008

Summer sales of personal computers failed to live up to expectations. Experts predict that shoppers will spend even less in the upcoming holiday season. 

Even though PC prices have remained constant, buyers may get a price break because computer makers do not want to be left holding a large number of unsold computers. 

The unofficial start of the promotional pricing season seems to be starting earlier each year said Roger Kay of Endpoint Technologies. Kay said that nervous computer companies may not make it through October without cutting prices. He said that wealthy people will continue to spend, but middle-income buyers will be looking for good deals.

Large drops in prices probably will not happen because PC makers have small profit margins. In addition to price cuts, companies may also make offers that include either free software or hardware in an effort to make expensive computers look like better deals. They may also try to lure customers by offering cheaper models in hopes of talking the purchaser into an upgrade at the point of sale. 

Top PC makers do not want to reveal pricing that may occur in the coming months. In an exception, Apple released its lineup for the holiday season. Price cuts on these products are modest.

The rise of “netbooks”, relatively cheap, small laptops used for Web surfing, may complicate predictions for PC price cuts. These devices lack the power and features of full-priced notebooks but offer a choice between an open-source operating system and Windows XP. These smaller devices may be more favorable now that XP is close to being replaced by the unpopular Windows Vista that can be found on most full-featured personal computers. 

More vendors, both large and small, are adding at least one netbook to current offerings at lower prices, lower than $500, than the most basic laptops.  Acer, aggressively setting low prices, sells Aspire models for under $400. 

Richard Klugman, an analyst for Majestic Research in New York, indicated that shoppers spent significantly less money on electronic gadgets in September which seems to be an early indicator that holiday shopping will be grim this year. He thinks that some products such as netbooks will continue selling no matter how much the U.S. economy cools. This trend could help PC makers maintain steady sales during the holiday season. But it could produce negative results by reducing the demand for laptops and regular personal computers. 

Many PC makers see the netbook as a secondary device for most families that have a powerful, full-featured PC. This may prove to be a faulty assumption due to the increase in the number of applications, music and movies, become available through a Web browser. 

Stephen Baker of the NPD group predicts that PC makers won’t push netbooks to the point that this product will hurt the sales of more profitable computers.  Baker thinks that the availability of shoppers this year will be the problem. The efforts to attract shoppers by cutting prices or pushing lower priced netbooks may not lure shoppers into the stores this year. 

Mark Hill, Acer’s general manager, wonders about the coming holiday season. He said that Acer will not revise its strategy. He is not convinced that, during these difficult economic times, the sales of personal computer will decrease as much as sales of other consumer electronics. He is convinced that, through the purchase of a personal computer, people will continue to invest in themselves.