Lethargic computer sales mean bargains for buyers

By Michelle Kessler
USA Today

•	Best buys Dell has cut the price of its Pentium 4 Dimension 4500 desktop to $849 from $999 after a mail-in rebate, plus it's throwing in a free printer, scanner or digital camera. Hewlett Packard offers a $100 rebate on its $1,099 ze1202 notebook with a combination CD writer and DVD player. Sony is discounting some VAIO notebooks $200 after a rebate, plus it's offering free memory upgrades.

Some of the best bargains:

• Dell Computer throws in free memory, hard drive and DVD drive upgrades with some PCs. Others come with $50 or $100 off.
• Gateway offers $100 rebates on many PCs, on top of price cuts. One of the best deals: the $699 500SE, which cost $849 in May.
• Hewlett-Packard and Sony dropped prices on some PCs and notebooks by $30 to $100 at the end of August. HP's Pavilion 510c costs about $700. That's $100 less than just weeks ago, ARS says.
• Staples and Circuit City offer instant rebates. Staples offers a $200 rebate on some PCs and notebooks. Circuit City takes $100 off all notebooks and PCs.

Why the cuts? Consumers aren't buying, and PC sellers want to clear shelves. Back-to-school sales "have been lousy," said Giga Information Group analyst Rob Enderle. HP President Michael Capellas says PC sales usually jump 50 percent to 60 percent as back-to-school sales kick in. This year, that jump was only about 35 percent, he said.

Blame the economy. The average price of a PC sold in a store is still about $800, according to research firm NPD Intelect. That's too much for many consumers in lean times, analyst Stephen Baker said. If the cuts fail to inspire enough sales, PC sellers may have to trim more, which doesn't bode well for the PC holiday season, which accounts for about one-third of consumer PC sales.

"Retailers are really going to try to blow out inventory before the holiday shopping season," said IDC analyst Alan Promisel. "Pricing could get even more aggressive."

PC makers need a happy holiday. Gateway lost $61 million in the last quarter. HP's second-quarter PC shipments dropped 16 percent year-over-year, IDC said. Apple's iMac is popular; but other Apple products are languishing. IBM has nearly pulled out of PCs.

The one bright spot is Dell, which made $501 million in its most recent quarter. Much of its success is tied to market share gains and efficiency improvements, which can only go so far, analysts say. CEO Michael Dell said Dell plans to grow by gaining market share and entering new markets, such as printers and PDAs. PC sales "didn't go away, they just stopped growing," Dell said. "There's still a tremendous amount of spending."