And it won't be the last of the price cuts for the year, said Emilio Ghilardi, worldwide marketing manager for commercial desktops at HP. Increasing competition among the big four manufacturers, improvements in distribution and manufacturing, and a scheduled cut in Pentium prices from Intel due at the end of October will likely combine to prompt a fresh round of discounts before the end of the year.
"Typically, we cannot comment, but you can see the industry is going through a round of difficult times," he said. In all likelihood, Ghilardi added, "You will see another round of price cuts in the next few weeks."
The new HP Vectra VL PC comes with a 300-MHz Pentium II Processor, an EIDE 4.0 GB Smart II hard disk drive, and 32MB of EDO RAM as well as Windows NT Workstation 4.0. It will ship in October with an estimated street price of $2,517.
The computer also comes in a minitower configuration with a EIDE 6.4GB hard disk, 64MB of EDO RAM, and other multimedia features. It will sell for $3,341.
Price cuts on existing Vectra models will go into effect on October 1. The cuts come to around ten percent. A HP Vectra VL with a 266-MHz Pentium II will sell for an estimated price of $2,239. Currently, the machine sells for around $2,400 to $2,300, he said. A Vectra VL with a 233-MHz Pentium II will be discounted to $1,925.
The future, Ghilardi predicted, will be good for consumers but more difficult (that is, more competitive) for the hardware industry. Although unit sales of computers continue to grow, competition for market share has become more intense, he said. Large vendors have steadily been growing market share at the expense of smaller vendors. Soon, though, the larger vendors will increasingly pillage each other, leading to more price competition.
"In the past, we took market share from the little guys. More and more we have to look at each other," he said.
"Build-to-order" and other optimized manufacturing techniques will also create increasing price pressure, as will industry consolidation. These systems essentially cut costs by reducing inventory that is otherwise eventually discounted. Dell has had build-to-order manufacturing for years; Compaq, HP, and IBM each launched variants of these programs this year.
"The price cuts you see now are because different companies are at different stages of their supply chain implementation," Ghilardi said. "Passing a cut from a vendor, everybody is able to do it. Passing a cut from supply chain management, not everyone can."