Compaq cuts prices, beefs up notebooks

The No.1 PC maker is also offering a lighter version of its Armada 4100 notebook as it tries to address the ultraportable notebook market, where it has been conspicuously absent.

The company said the pricing move was fueled by its successful build-to-order manufacturing model. This sales model reduces overall costs by building computers when the order is received, similar to what successful direct PC suppliers such as Dell Computer and Gateway 2000 do.

The price reductions are on all Desktop 2000 and Deskpro 4000 models.

Computer system integrators and computer dealers only expect prices to continue to decline as the major vendors vie for market share.

"We're not far away from a $500 [PC]," said Mike Boyle, chief executive officer of ComputerLand of New Mexico. "The most you can spend on a computer now is $3,035."

Dealers too are driving prices down through competition for large contracts. In New Mexico, a competing computer reseller recently landed a contract to provide close to 1,500 computers, said Boyle. That dealer sold the products at cost to the customer. The profit came as a result of a rebate from the vendor.

The build-to-order strategies will further drive prices down. Through these strategies, not only does manufacturing become more efficient, but also companies no longer have to offer "price protection," that is, refunds to dealers for equipment that they bought before a large discount was instituted. Under build to order, discounting ideally never occurs because no inventory exists.

Compaq's price reductions come on the heels of Monday's announcement by Compaq of the first Net PC on the market, the Compaq Deskpro 4000N. Ironically, Compaq's Net PC--which starts at about $1,150--is priced more than some of the company's more inexpensive desktops, which start at below $1,000.

The entry-level Compaq Deskpro 2000 5166/1200, with a 166-MHz Intel Pentium processor, 1.2GB hard drive, and 16MB of memory now sells for $949, compared to its old price of $999. A Deskpro 2000 system with a similar Pentium processor but 2.1GB hard drive and 16MB now goes for $1,049, compared to its old price of $1,199, the company said.

Compaq also slashed prices up to 16 percent on Armada notebook PCs. The Armada 4160T, with a 12.1-inch active-matrix screen and 2GB hard drive, falls from $3,999 to $3,399, a reduction of 15 percent.

Other 4100 Armadas fell between 10 and 16 percent. This could reflect pricing moves by IBM. Big Blue has been aggressively cutting prices on its popular 560 and 380 notebooks.

Compaq also introduced a modified Armada notebook, which now weighs in at about 5.2 pounds. The notebook is not a new design but sheds an external handle which holds an extra battery. Also, the CD-ROM unit is now external instead being part of a more bulky docking station.

Slim notebooks have been something of an Achilles heel for Compaq, but this is where the company is staking its portable future.

"We're finding that most of our customers are going for the slim and light configuration," said Mark Vena, director of marketing for mobile products. "The 4100 form factor is going to be the mainstay...Any new models will take on this flavor," he added.

The ultraportable notebook market is currently dominated by IBM's 560 model, Toshiba's Portege, and Digital Equipment's Ultra series, including its newest Ultra 2000.

Also, Compaq will next month release its first Armada notebooks using the higher powered "Tillamook" processors from Intel. "It will ship around the World Series," Vena said. The Tillamook processors are Pentium MMX processors running at 200 MHz and 233 MHz.

The 4160T-Slimline model is priced at $3,599.