Don't look for pressure on PC profit margins to ease up any time in the near future.
As we've heard from Intel recently, the chipmaker expects a soft pricing environment to continue for the near future--the result of excess inventory and not enough orders.
System builders and resellers aren't traditionally big fans of soft pricing environments (or any environment that leads to uncertainty in pricing.) However, executives at direct PC maker Dell don't seem to be frowning.
Kevin Rollins, Dell's CEO, told investors at a Citigroup Smith Barney technology conference last week that falling component prices mean the Round Rock, Texas-based company could take its own pricing down even more. Smith Barney, in its own note to investors, reported it this way (registration required):
[Rollins] cited one-half percent per week declines in aggregate component prices during recent months. This represents the most favorable component environment that the company has enjoyed for more than a year. Specifically, [he] noted that flat-panel prices have resumed more normal declines and that early indications suggest little rise in DRAM pricing in connection with the DDR2 transition.
Rollins also told investors at the conference that he thought the pricing environment was--as Intel executives said--partly the result of inventory corrections after an aggressive buildup.
Regardless of the reason, some system builders and Tier 2 manufacturers have recently complained that the soft component pricing was combining with a Dell-HP price war in the PC space to ratchet up the pressure even more. With pricing now at a one-year low (according to Rollins) and Intel in line to reduce pricing on its Grantsdale chipset on Sept. 27, it looks to get worse before it gets better.