VARs Must Educate Users On Bargain-Basement PC Prices

VARs and analysts expect corporate PC prices to stabilize for the remainder of this year, but consumer prices will continue to plunge, tantalizing small-business customers with systems that cannot meet their computing needs.

Climbing prices on components, such as memory and hard drives, will keep corporate prices from plummeting, said Joseph Ferlazzo, analyst at Technology Business Research Inc., Hampton, N.H. Mainstream consumer PC prices will dip below $500, while the typical business PC will hit the $1,000 to $1,200 range, he said.

"Some computer prices are starting to stabilize, but the consumer market is going to go down," Ferlazzo said. "On the business side, they're not going down so aggressively."

The average selling price of small-business PCs will drop to $1,345 in 1999 from $1,675 in 1998, according to Sherwood Research Inc. Enterprise desktops will drop to $1,325 from $1,710, the research firm said.

"Corporate pricing is stabilizing quickly," said Chris Pierce, research director at Sherwood Research, Dover, Mass. "Prices have held up fairly well."

VARs are expecting price stability, as well.

"I do not expect prices to drop substantially," said Frank Abate, sales director at Infinity Technologies Inc., Mississauga, Ontario. "A properly configured, 24-month functional system has traditionally been [priced around] $1,500 for the past few years. The end user just keeps getting a richer feature set to utilize for those dollars."

But VARs handling small-business customers are concerned about price pressure from the consumer market, with $399 PCs from Emachines Inc., Korea, available now and $299 systems on the way from Seattle-based Microworkz Computer Corp.

"I'm afraid that a lot of corporate customers are going to start thinking that a machine has to cost less than $500,that they won't look at what's inside but just look at the price," said Eric Feldman, director of corporate accounts and marketing at Computerland of Plainview, N.Y. "How do I convince someone that a $399 machine isn't what they need and that the one they need costs four times the money?"

It is a matter of education, said analysts. "VARs and integrators that cater to small businesses are going to run into [price pressure from the consumer side]," Sherwood Research's Pierce said.

Low-priced consumer models run on slower non-Intel Corp. processors and often do not include basic hardware such as floppy or CD-ROM drives, which small-business customers need to load software. "Most cheap consumer PCs are substandard for what most people come to expect to run [Microsoft Corp.'s] Windows applications," said Feldman.

Small-business customers that purchase cheap PCs sometimes turn to VARs after discovering that the consumer PC is a disappointment, said Tony Audas, director of purchasing at Technology Partners Inc., Ann Arbor, Mich. "We're getting the second sale,after they found out why the PC cost $699," said Audas.

VARs whose customer base is made up mostly of larger companies said they do not have to be concerned about pressure from the consumer market. "Most of the real technology dollars are spent by the savvy corporate customers who are looking for a certain level of long-term functionality, and they know there are always trade-offs in a low-cost solution," said Infinity's Abate.