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Notebook fire sale

New technology, market glut leading to lower prices.

It's almost the season to buy a notebook.

Prices for notebooks with "classic" Pentium processors, which don't come with Intel's new MMX technology, are hitting fire-sale levels as notebook PC manufacturers begin to transition all models to MMX Pentium processors, mirroring what has happened since Intel phased out the classic Pentium for desktop PCs. In many cases, desktop PCs with classic Pentium processors are now priced below $1,000.

Notebook PC manufacturers are also making way for the release of new models based on the upcoming "Tillamook" MMX Pentium chip for notebooks, due to be announced by Intel September 8. The new processors will run at 200 and 233 MHz, surpassing the 150- and 166-MHz MMX mobile Pentiums already on the market.

Non-MMX Pentium notebooks running at 133MHz with large, 12-inch screens and CD-ROM drives will likely be priced in the $1,000-to-$1,500 range. Without CD-ROM drives, notebooks of that class are already selling for under $1,000.

Hewlett-Packard's OmniBook 5500, for example, with a 100-MHz Pentium, an 11.3-inch screen, and 1.35GB hard disk drive, is now selling at some major mail-order houses for $999. IBM's popular 560 ThinkPad, with a 120-MHz processor and 12.1-inch active-matrix screen, is now going for as little as $1,849 at some resellers, down from the $3,500 level only a couple of months ago.

A number of market factors have converged to produce this buyer's market, observers noted. For one thing, customers have become more savvy about the industry's upgrade cycles, said Rob Enderle, senior industry analyst at Giga Information Group, and timed purchases accordingly.

"Buyers have been holding off buying older generation products," he said. "They?ve been waiting for the discounts and waiting for access to the Tillamook. We are likely going to see a quick round of price cuts as Tillamook comes out."

Tillamook will start to appear in systems soon after the chip debuts in September, he said. The systems will cost between $2,500 and $4,500.

Just yesterday, Digital Equipment cut prices on its HiNote VP models. Most of these cuts affected classic Pentium models. The price of a 133-MHz model, for example, dropped under $2,000. It comes with a 12.1-inch screen, a CD-ROM drive, and a 1.35GB hard drive.

A Toshiba 430CDS notebook with a 120-MHz classic Pentium chip, 16MB of memory, a 10X CD-ROM drive, an 11.3-inch screen, and a 1.2GB hard drive is selling for less than $1,500.

One salesperson at Insight Direct, a major mail-order house, said that inventories of models with classic Pentiums are being rapidly depleted because of the bargain-basement prices. "They're just kind of disappearing because manufacturers are [moving] away from them."

At the other extreme, high inventory levels of current Pentium MMX notebooks on the eve of the release of the Tillamook will likely lead to further price cuts and bargains for consumers over the next few months.

To lessen historically chronic notebook shortages, manufacturers in 1997 boosted production. The trend led to a glut. Resellers across the country are now reporting that thousands of notebook models are in stock at distributors.

"With the exception of only a few notebook lines, like some of the Compaq high-end models, everything else is in ample supply," said Eric Walton, vice president of product management at Entex Information Services.

"You can get 8,000 of one Toshiba, 12,000 of another," said another reseller.

Among major manufacturers, Toshiba appears to be having the toughest time in this market. Not only are the company's notebooks overrepresented in the overall inventory, but also Toshiba is not selling as well as other vendors.

For the first six months of 1997, Toshiba sales through computer resellers and retail outlets grew by 9 percent while the industry as a whole grew 37 percent, said Matt Sargent, an analyst at Computer Intelligence.

Market share has accordingly declined, especially in the business markets. For the first six months of the year, IBM was the number-one notebook vendor in the computer reseller channel, which is one of the primary conduits for business purchases, said Sargent.