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Compaq cuts notebook prices

Aiming above all for market share, the PC maker slashes notebook prices for the second time in two weeks and confirms it designs for the middle of the road.

Compaq (CPQ) cut prices on high-end notebook computer models today: the company's mantra continues to be "market share, market share."

In its never-ending quest to replace Toshiba as the number-one notebook vendor, Compaq has pledged itself to bring out portable products attuned to the factors that motivate consumers the most, said Mark Vena, director of mobile products for North America.

This usually boils down to speed and price; it means delivering faster computers in a timely fashion.

"Every time Intel makes a processor change, we will be on the heels of that," Vena said. Price cuts, he added, are inevitable for maintaining market share.

On the other hand, market-share obsession means that Compaq will not be on the cutting edge with innovations like 14-inch screens or sub-notebook form factors. Instead, the company will generally follow other vendors in those situations because they still constitute fringe market arenas.

Large screens, Vena said by way of example, "probably constitute less than 3 percent of the market. The 14-inch screen consumes a lot of power. They also still command a fairly significant price premium. The difference between a 14-inch screen and a 12-inch screen is $1,000." Currently, most notebooks come with either 11.3- or 12.1-inch screens.

As a result, Compaq notebooks with 14-inch screens may not appear until very late '97 or early '98. Compaq in fact has yet to launch a notebook with a 13-inch screen, although other vendors have models out. Two-pound ultralight computers, like the Toshiba Libretto, are not on Compaq's product map for this year.

Nevertheless Compaq has strengthened its market position dramatically. "In the second quarter of '96 they were in a weak product position. Now they're much stronger," said Bruce Stephen, a research vice president and analyst at International Data Corp. (IDC), who estimated that Compaq's market share grew 101 percent in the second quarter compared to last year.

The quest for greater market share comes out of the company's experience in 1996. Then, industry-wide shortages on notebook parts caused the company to follow other manufacturers. "Last year, when were in a back order situation, we were reticent about coming out with new products. We were two to three generations behind our competitors," said Vena.

Vena reiterated that Compaq has discontinued the LTE 5000 series of computers, which were discounted today. From now on, all business notebooks will be marketed under the Armada name.

Today's price cuts on the 7000 series of Armada computers and LTE 5000s shave approximately $600 to $700 of the suggested list price on various models in both lines. Overall, the cuts amounted to discounts of around 15 to 21 percent. A top-of-the-line Armada 7750MT, for example, with a 166-MHz MMX Pentium and 32MB of memory went from $5,799 to $4,999 under the new cuts, a 14-percent discount.

Last week, Compaq cut the prices on the Armada 4100 and 1500 series by around $200 to $400, or about 20 percent. The cuts followed similar discounts by other vendors.

"Last week's price cuts were mostly from the competition. In the value line, you have to be very sensitive to price. If you are off the mark by $200 or $10, customers will walk away," he said. "With the 5000 and 7000 some of it is price competition but part of the motive is market share."