Dell cuts PC prices, cites Asia

Dell links price cuts of up to 15 percent to cost benefits from the Asian economic crisis.

2 min read
Dell Computer (DELL) sliced prices by up to 15 percent on selected models in its line of business PCs, attributing the modest cuts to savings on components resulting from Asian currency devaluations, a move rivals should be able to follow.

The direct vendor reduced the cost of its OptiPlex series by as much as $400, saying its build-to-order manufacturing scheme allows it quickly pass along price drops on foreign-made memory, hard drives, and CD-ROM drives. The increased strength of the dollar against Japan's yen, South Korea's won, and Taiwan's dollar means that the cost of imported parts falls.

"It's difficult to quantify how much is related to recent economic situation, but because the decrease in prices has been steeper in recent weeks, we believe some to that is due to Asia," a Dell spokesman said.

But the price of memory has been on a yearlong slide, for a variety of reasons, while the cost of hard drives has been falling of late because of oversupply.

Since Dell's chief rivals, Compaq, Hewlett-Packard, and IBM, also obtain these commodities from Asia, it's likely they will be able to match the Round Rock, Texas, company. The trio typically carry larger inventories and have more products in the pipeline, however, meaning price actions would take longer to make their way to market.

"There'll be a wave of similar pricing actions from PC vendors--the usual suspects," predicted analyst Richard Zwetchkenbaum.

Dell historically has said it is passing along price savings on components to its customers, he added. "It's pretty much the same story except this time there's an Asian twist to it."

Dell is the first major U.S. PC manufacturer to ascribe price reductions to the weakened economies in Japan, South Korea, and Taiwan, Asia's principal manufacturers of computer components. Dell sells less than ten percent of its PCs in Asia, meaning its market exposure is slight compared to its supply-side benefits for the American market.

In contrast, PC companies with significant Asian exposure are beginning to experience troubles because of the "Far East." Earlier this week, CNET's NEWS.COM reported that Intel is facing "massive" cancellation of notebook PC processor orders owing to the sluggish Asian market, particularly Japan.

Dell's OptiPlex GXaL, which comes with a 300-MHz Pentium II, 32MB of memory, a 2.1GB hard drive, a CD-ROM, a networking card, and a 15-inch monitor, falls to $2,338 from $2,748 following today's price cut. The OptiPlex GN, with a 233-MHz Pentium MMX, 32MB of memory, a 3.2GB hard drive, a CD-ROM and a 15-inch monitor drops to $1,769 from $1969.

The OptiPlex line typically comes with preinstalled networking cards and features "managed PC" technologies that allow systems personnel to remotely maintain them.