LONDON, UK, July 12, 2002 - According to IDC, prices within the PC market continued to be under pressure. While prices had been on the increase in March and April, after a constant decline throughout 2001, IDC's Pricing Index for May and June indicates another potential fall, with prices losing 1.2 points sequentially in May, and another 2.2 points in June.
Year-on-year, prices remain very low, displaying a decline by 10.3 points overall compared with June 2001, with desktop prices decreasing by 7.6 points, Intel servers by 10.5 points, and notebooks by 12.9 points as a result of fierce vendor competition and continued development of the new entry-level notebook market.
Benefiting from the market transition towards Pentium 4 in the first quarter of 2002, desktop and server prices had gradually returned to mid-2001 levels. Increased component prices (memory, storage) had also clearly contributed to the upward trend. Desktop prices, however, fell sequentially in June by 3.6 points, as slow business demand over the last two months forced vendors to be more aggressive.
On the notebook side, prices are continuing to display a sharp decline. As a result of fierce competition in the low-entry segment - despite persistently high component prices, with memory prices starting only recently to decrease - IDC's Notebook Price Index remains below 65 and fell by another 2.4 points in June. "The evolution of the notebook market by price band clearly outlines the major price shift that has been taking place since mid-2001," said Eivind Malm, Senior Analyst for IDC's European Personal Computing group. "While 75% of the notebook market was at a price point above EUR 2,000 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. Nearly 70% of notebook sales are currently below EUR 2,000, and over 50% below EUR 1,750," he added.
High component prices will continue to have an impact on the notebook market structure and expected margins. In order to remain competitive and gain share in the booming low-price point segment, vendors have to maintain attractive pricing, therefore having to absorb increased assembly costs, resulting in reduced margins.
From a vendor perspective, Dell maintains pressure on the market, and especially in the UK and Germany. Additional price pressure came from HP, which carried out a major share acquisition plan across Europe from the fourth quarter 2001 in both the desktop and notebook markets.
Despite the increase in component costs that forced all vendors to up their prices, HP maintained its prices at a low level across all product lines. Making a major push into the consumer market, while continuing to address the SMB market very effectively through its Top Value program, HP led its competitors either to align themselves or lose share to preserve margins.
The merger between HP and Compaq represents an important challenge for all players and will certainly affect vendor pricing strategies over the next few months. 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. The notebook market will also remain an important battlefield among the major vendors, yet it will face a more fragmented competitive landscape as local players will continue to play an important role in the SMB and consumer space.
IDC European Pricing Index by Form Factor
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Source : IDC European Pricing Barometer, July 2002
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For more information, contact:
Eivind Malm
+44 (0) 20 8987 7224
emalm@idc.com
Karine Paoli
+44 (0) 20 8987 7218
kpaoli@idc.com