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Compaq cuts home PC prices

Compaq has cut prices on many of its consumer PCs, a move indicating a holiday-season price war.

Compaq Computer (CPQ) cut prices on its Presario line of consumer PCs by up to 25 percent, a move which kicks off holiday PC sales.

IBM is also getting into the act. Today, IBM announced low-cost consumer models for the first time, finally entering a burgeoning market that it had been reluctant to participate in. (See related story)

Compaq, now the top PC vendor in the consumer market, is targeting these price cuts for the holiday season. The reductions are being made to both desktop and notebook computers.

"These are planned price cuts. We do them every year at this time. Compaq continues to grow profitably in this market," a Compaq spokesperson said.

The price cuts come mostly at the high end of the Compaq lineup. The company is already aggressively marketing low-cost computers that sell for as little as $799.

Compaq price cuts
$2,699 $2,299 15
$2,999 $2,499 17
$1,499 $1,199 20
$1,799 $1,499 17
$1,999 $1,699 15
$2,399 $1,799 25
$2,699 $2,199 19
$2,999 $2,499 17
* denotes notebook model
** denotes Pentium II chips
Source: Compaq Computer

The Presario 4824, billed as Compaq's ultimate multimedia PC, will fall from $2,399 to $1,799, a price reduction of 25 percent. The Presario 4800 Series includes a 233-MHz MMX Pentium processor, 6.5GB hard drives, and 32MB of high-speed memory on select models, in addition to MPEG2 video playback technology, JBL Pro Speakers, and a 56-kbps modem.

The 4508, a diminutive minitower design, will drop in price from $1,499 to $1,199, a 20 percent decline. This comes with a 200-MHz MMX Pentium processor, 24MB of memory, and a modem.

Notebooks also received price cuts ranging up to 13 percent. The Presario 1610 with a 150-MHz Pentium MMX chip, a 1.6GB hard drive, and a 12.1-inch display was reduced in price from $2,699 to $2,299.

Compaq is in the driver's seat in the consumer market. The world's largest PC manufacturer currently has 67 percent of the sub-$1,000 PC market, for instance, although it is less dominant in systems costing more than $2,000.

"For Compaq, they are just continuing an onslaught and trying to bang that low-end market and exclude as many competitors as they can," says Matt Sargent, an analyst with market research firm Computer Intelligence.

"IBM is just reacting. They've lost huge a huge amount of market share--they are down to 4 percent of retail desktop market, where they were at 14 percent in September of last year," Sargent says. "It's way too little, way too late...I see an abysmal quarter for [IBM's] consumer group. It's a shame becase they put themselves in a good position in Christmas 1996."

A number of the direct systems vendors have also rolled out agressively priced systems of late, including Dell Computer and Gateway 2000, which are offering high-end 300-MHz Pentium II systems for as low as $2,500 with a monitor.

Industry analysts say that price cuts are likely to continue throughout the Christmas season but that the largest of the cuts have already been made. This is primarily because no further price reductions in one of the most expensive parts of the computer, the processor, are expected until next year.