Dell axes jobs, starts PC price war

Dell, the world's largest PC manufacturer, has unleashed a price war in a bid to cope with declining sales.

Dell, the world's largest PC manufacturer, has unleashed a price war in a bid to cope with declining sales.

Dell, which has also announced plans to cut 4,000 jobs around the world, is slashing prices of corporate desktops by 10% and Hewlett-Packard and Compaq have responded with large reductions of their own.

HP said it would cut prices on corporate desktop PCs by up to 28%, while Compaq announced reductions of as much as 31% on some of its PCs.

In the past, cuts of this scale have been due to lower component prices, particularly reductions in processor prices from Intel or AMD. Supplier representatives are keen to push this as the reason for the latest round of price cuts.

Dave Zabrowski, HP's vice president and general manager of business PCs for North America, said, "Component prices continue to fall at a fairly rapid pace and it's our intention to continue to be competitive with our offerings."

Steve Telaroli, Compaq's North American business product manager for desktops, said the recent reorganisation of Compaq's consumer and corporate PC businesses into a single entity had helped the company reduce its PC prices. "It's that plus passing on component cost reductions direct from suppliers," he said.

However, Bloor Research analyst Mark Simmons believes there is a more fundamental reason for the price reduction.

"These price cuts have largely come about because the market has been absolutely saturated," he said. "Software technology is moving on but the hardware isn't because it doesn't need to, which means the consumer doesn't really feel the need to upgrade, so even though prices are being lowered, people still aren't buying."

Simmons believes that further cuts are in the offing. "There will be consolidation in the market and prices will bottom out soon, but there will be further cuts before this occurs, as the vendors still have room to manoeuvre on price," he added.

Separately, Dell has issued a product recall after a design flaw was uncovered in batteries incorporated in its Inspiron 5000 and 5000(e) notebooks.

Almost 300,000 machines are being recalled after a notebook caught fire because of overheating batteries.

Stuart Finlayson

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