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PC prices plummet in Europe

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ComputerWire: IT Industry Intelligence

Early migration to Pentium 4-based desktop PCs and PC servers helped the European PC industry reverse a year of falling prices in the first quarter, but according to the latest price index findings of IDC, this respite has proved brief, and prices are spiraling down once more.

According to the Framingham, Massachusetts-based market researcher, the overall PC price index for May sank 1.2 points, and slipped a further 2.2 points in June, as fierce competition eroded the fleeting premiums enjoyed from early Pentium 4 sales. Year-on-year, the overall June index was 10.3 points lower.

The indications are that pricing pressure will continue to increase and drive the index down further. In June, for instance, the desktop index slipped 3.6 points sequentially, while the notebook index declined 2.4 points from May.

This declining trend is set to continue in the notebook sector says IDC, noting that the market is evolving into price-differentiated bands, with lower price bands showing the healthiest growth. Whereas before the start of 2001 75% of European notebook sales enjoyed a price point higher than 2,000 euros ($1,976), today almost 70% of notebook sales come under this price point, with 50% of them averaging less than 1,750 euros ($1,729).

The crimp on prices is great news for buyers, but it spells hard times for suppliers in a market that is increasingly ripe for consolidation. Margins, IDC notes, are bound to narrow as the scramble for market share pushes systems prices down faster than component prices.

In these conditions, smaller suppliers can expect no mercy from the likes of Dell, which continues to push down hard on prices, especially in the UK and Germany, and Hewlett-Packard Co, which launched its own price assault earlier this year, even before acquiring arch desktop and server rival, Compaq Computer Corp. The HP/Compaq mega merger represents "an important challenge for all players" said IDC.

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