PC prices to fall again

PC prices are falling again - and the merger of Hewlett Packard (HP) and Compaq could push them down even further, according to researchers IDC.

Moves towards Pentium 4, as well as increased memory and storage prices, pushed desktop and server prices back to mid-2001 levels in the first quarter of this year.

But IDC said slow business in the last two months had forced vendors to be more aggressive, pushing prices down again.

And the organisation warned that the merger of HP and Compaq could push prices down further still.

"Prices on the desktop market could suffer further from the negotiation platform that the new company represents and lead to further consolidation and increased pressure on margins," said Eivind Malm, senior analyst at IDC.

In the last year desktop and server prices have declined. But notebooks have come down in price most because of fierce vendor competition and the introduction of entry-level notebooks.

"The evolution of the notebook market by price band clearly outlines the major price shift that has been taking place since mid-2001," Malm said.

"While 75 per cent of the notebook market was at a price point above €2,000 [£1,275] until the beginning of 2001, the expansion of the market towards lower price points and fierce vendor competition on entry-level products have reversed the trend," he added.

"Nearly 70 per cent of notebook sales are currently below €2,000 [£1,275], and over 50 per cent below €1,750 [£1,115]."

IDC said high component prices would hit margins, because to build market share in the booming low-price market vendors will absorb increasing assembly costs to keep prices low.

Dell maintains pressure on the market in the UK, according to the researchers.

And IDC said HP has held its prices down despite the increase in component costs, making a push into the consumer and small and medium business market, forcing rivals to do the same or lose their market share.