The good news for PC companies is that consumers are starting to buy computers again. The bad news is that they are not paying very much for the machines.
The “new” PC business is dominated by inexpensive laptops and netwooks, some of which have prices as low as $300. Most research shows that Apple (AAPL) dominates the market for laptops with prices over $1,000, leaving the less desirable market of low-cost PCs to companies such as Dell (DELL), HP (HPQ), Lenovo, and Acer.
Talking about pricing one analyst observed to Reuters, “There’s always going to be pressure. The question is how well do you manage the supply chain and try to reduce costs at the same pace as the price decline or faster.”
The trend may have a permanent effect on the profit margins of the largest PC companies and chip suppliers like Intel (INTC). The world’s dominant semiconductor company produces the Atom chip for netbooks, and the company gets a very low price for them compared to the Pentium chips that run more powerful PCs.
Business and consumers are likely to become more interested in new machines with the launch of Windows 7 from Microsoft (MSFT) in October. The surge in demand would typically be welcomed by the PC industry, but, with profits on each computer falling sharply, the renewed buying is a mixed blessing.
Douglas A. McIntyre
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