Compaq Slashing Price Tags on Some PC Models

Compaq Computer Corp. said Thursday that it is slashing prices on its home personal computers, firing up competition for the Christmas season.

The announcement by Compaq comes just as IBM Corp. officially launched its first Aptiva desktop priced at less than $1,000, timing that Compaq executives called a coincidence.

But analysts said there is no question that both Compaq and IBM are staging all-out assaults on the holiday shopping market this year.

“Coupled with IBM’s entry, Compaq’s move is further indication that the major branded manufacturers are dead serious about taking this market away,” said Bill Schaub of market research firm Dataquest.

Compaq, which has attacked the low end of the consumer PC market with several models below $1,000, left unchanged prices on its two least-expensive Presario models, which currently retail for $799 and $999, but cut prices on eight other models.

The steepest price cuts were on Compaq’s 4800 series Presarios, higher-end models that Consumer Marketing Director Leslie Adams said do especially well during December, not surprisingly the top retail month for personal computers.

“If you look at the major volume-selling months, I would say December is always the biggest volume-selling month, and after that is August,” Adams said. “Back to school is huge, but not as huge as December.”

IBM said its Aptiva E16 is designed for first-time buyers who want a PC with most of the bells and whistles, such as sound and flashy graphics, and for existing PC owners who want a second machine in the home. It will be priced at $999.

For IBM, it’s “welcome to the real world,” said analyst David Wu at ABN Amro Chicago Corp. in San Francisco. “It’s better late than never” to get into the low-price segment of the PC market.

In a recent conference call with analysts and reporters, IBM’s acting chief financial officer, Lawrence Ricciardi, said the company had misjudged the rapid acceptance of low-cost PCs, telling analysts, “We’re on that case like a trout on a fly.”

In New York Stock Exchange trading, IBM shares lost $1.69 to close at $101.06, and Compaq shares fell $1.50 to close at $65.44.

Compaq also is planning a national television advertising campaign for the Presario line developed by Interpublic Group unit Ammirati Puris Lintas, New York. Adams declined to discuss the budget for the campaign.

While the holiday stakes are high for Compaq and IBM, those companies also have massive corporate businesses to draw on during slow retail seasons. Caught in the cross-fire are smaller companies heavily slanted to retail.

“[Compaq and IBM] are creating a two-tiered market, with a high end and low end, and they’re taking the middle right out,” Schaub said.

“Almost everybody else is caught in the middle,” Schaub said, listing companies such as NEC Corp. affiliate Packard Bell, Samsung Electronics Co. unit AST Research and Apple Computer Inc.

As for the timing of the announcement, Compaq’s Adams said the price cuts have been in the works for several weeks, and any proximity to IBM’s move was “coincidental.”

“This has been planned for a while and certainly, for advertising reasons, our retailers had to be notified quite awhile ago,” she said.