Eric and Shelly Hillier of Provo couldn't have picked a better time to buy a personal home computer.
Just like the airline industry, the personal-computer market is being rocked by a price war that's sending prices plummeting. Within the past few months, major computer manufacturers have slashed prices - in some cases by 40 percent to 50 percent - to stay competitive. A few months ago, IBM drastically cut prices while Compaq, Epson and NEC introduced new lines of low-cost computers."The events of the last few months have led us to a tremendous price war that grips the PC market," said T.C. Doyle, senior editor of the Computer Resellers News, a computer trade magazine. "It's truly a buyer's market."
A year ago a 386SX processor with a 40-megabyte hard drive and color monitor sold for about $2,000. Today, the same package would go for around $900.
"We've been waiting about two years to be able to afford a computer," Eric Hillier said. "A year ago they were so expensive I couldn't even think of getting one, but today they're so affordable it's almost dumb not to."
The prices are so low that even retail merchandise stores like Silo, RC Willey and Bizmart have jumped into the market. However, most of these stores don't offer the on-site installation and training other computer stores do.
The low prices are a sign that the computer industry is finally growing up, Doyle said.
"The PC industry hasn't gone through a maturation cycle like most industries do," he said. "These are market realities that won't go away."
As with most things, the economy is partially at fault for the recent drop in computer prices.
"IBM, Compaq and Apple thought they could demand high prices for their computers, and for years they could," Doyle said. "But when the economy went bad, they just couldn't do that anymore."
Computer clones - no-name computers - used to be priced hundreds of dollars less than name brand computers. Today, a name brand like IBM costs only about 25 percent more than a clone.
"The last big drop in prices is because the big guys knew they were losing market shares to the clones," said Gary Adamson, president of the Connecting Point in Provo.
Another contributor to the price war is the increased technology available to computer manufacturers.
"When IBM introduced the first PC in 1982, it had dual floppy disks, no hard drive, a monochrome monitor and retailed for $3,495," said Charles Burgoyne, president of Burgoyne Computers. "Today you're getting a superior product for a lot better price."
The future of this price war will depend on whether manufacturers will be able to survive the low profit margins.
"It's already started (to level off)," said Richard Burgoyne, vice president of Burgoyne Computers. "At Comdex in Chicago, four or five big manufacturers announced they're stopping production of personal computers because of the tight market."
Others agree that as manufacturers drop out of the market, the prices will begin to stabilize.
So where does that leave you, the buyer? Richard Burgoyne believes that even though technology will continue to lower computer prices, the time to buy is now.
"I feel that technology is changing so rapidly that to wait any length of time to buy one just means you'll be that much longer without a computer," he said.
Doyle agrees.
"These prices will last at least throughout the year," he said. "So go ahead and spend your money and don't be upset if you pick up the paper in a week and see it $10 cheaper."
Do homework before taking big byte
According to Richard Burgoyne, vice president of Burgoyne Computers here are some steps you should take when buying a home computer:
- Decide what you need the computer for (e.g., games, graphics, finances or basic word processing). This will help you determine what size computer to buy.
- Determine whether you will need computer training or guidance to go along with your purchase.
- Find companies that can sufficiently train you and have been around for a while.
- Shop around for prices. Remember, while it may seem companies offer the same components in their computers, those parts may be inferior or of poor quality.