Dell whacks prices on select notebooks, desktops

Stung by market share losses in first quarter, PC maker is slashing prices in an effort to draw customers.

Stung by market share losses in the first quarter, Dell is cutting prices in an effort to woo customers.

The Round Rock, Texas-based PC maker is selling an Inspiron E1505 notebook with an Intel T2300 Core Duo processor, 1GB of memory, an 80GB drive, a 15.4-inch screen and a DVD burner for $699 on Monday, down from the usual price of $1,234.

A similar notebook from Toshiba on CompUSA's site sells for $1,249, while a similar Hewlett-Packard sells for $1,199. Gateway clocks in at $999.

Dell is also selling a B110 Dimension desktop with a budget Intel Celeron chip, 256MB of memory and a 19-inch flat panel monitor for $349.

With a 17-inch CRT monitor, the same computer costs $299.

Shipping, usually $99 on budget PCs at Dell and often a wellspring of consumer complaints, is free for a limited time.

Finding the deal on Dell's Web site, however, can take some work, and Dell offers various configurations of similar deals that can be easier to find. The exact deals mentioned in this article were touted in an ad in the San Francisco Chronicle.

"We historically have made these moves to keep us competitive," said a Dell spokesman.

Although the deals are offered for a single day, Dell has a history of following up its one-day specials with similar specials on subsequent days. Back in 2004, for instance, it roughly halved the price of certain notebooks in various deals.

The price cuts in part stem from discounts on components. Excess inventories of processors and other parts are causing manufacturers and distributors to cut prices to get rid of inventories. Similar hot-spot deals will likely pop up at retailers and the Web sites of direct PC sellers over the next few weeks, if history is any guide.

Additionally, Dell is facing a backlash from business customers and consumers. Since 2004, consumers have increasingly complained about Dell's service and support while the company's satisfaction rating with businesses has bobbed up and down.

The company's prices have trended up in recent years. In 2002, the average selling price for a consumer PC from Dell was $1,084, according to research firm IDC. HP's average selling price for the same year was $1,009. The average for all manufacturers was $1,030. In the first three quarters of 2005, Dell's average selling price for U.S. consumer PCs was $854, more than $200 above HP's $651 average. The average selling price for the market as a whole was $744.

The higher prices in part come from the fact that Dell has targeted high-end and midrange buyers. The bargain segment of the market, however, has grown. Both Acer and Toshiba have benefited in recent quarters with more aggressive pricing, according to analysts.

These factors in part converged to cause Dell to lose market share in the first quarter, a very rare occurrence. Typically, Dell grows substantially faster than the market as a whole and gains market share.

If the trend continues and Dell loses market share overall for 2006, it will mark the first time that Dell on an annual basis grows slower than the market since 1989, according to Gartner. The firm doesn't have data for the years before that.