
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, August 21, 1994                   TAG: 9408200016
SECTION: BUSINESS                    PAGE: F-1   EDITION: METRO 
SOURCE: By STEVEN VONDER HAAR FORT WORTH STAR-TELEGRAM
DATELINE:                                 LENGTH: Medium

FIRST SALVO FIRED IN COMPUTER PRICE `SKIRMISH'

Compaq Computer Corp., in what may be a warm-up for a personal computer price war anticipated this fall, has begun trimming prices on selected computer lines by as much as 22 percent.

The Houston-based computer maker is cutting prices on a variety of product lines aimed primarily at business users in a move expected to increase pricing pressure on other manufacturers, particularly International Business Machines Corp. and AST Research, analysts said.

The cuts, announced last week, which come on Compaq's Deskpro, Prolinea and Contura product lines, range between 4 percent and 22 percent.

``At this point, I still expected more of a price skirmish than a price war,'' said Jim Poyner, analyst with the Oppenheimer & Co. investment banking firm in New York. ``And these cuts by Compaq reflect exactly that.''

More price cuts from all manufacturers, including Compaq, are likely by late September, said Tim Bajarin, president of the Creative Strategies industry research firm in San Jose, Calif.

For manufacturers, the idea is to get the right products at the right price in front of PC buyers in time for the fourth quarter - a period when computer manufacturers generate nearly half of their sales, Bajarin said.

``The best buys for home computer users should kick in around Oct. 15,'' Bajarin said. ``The base price for a multimedia system plus monitor has the potential to fall under $1,000.''

Driving expectations for the decline in PC prices has been a move by Intel Corp., which makes most of the processors used in Windows-compatible PCs, to push its next generation Pentium microprocessor into the mass market.

By touting its Pentium chip, Intel can take the steam out of competitors such as Advanced Micro Devices and Richardson, Texas-based Cyrix Corp., which are trying to sell their own versions of Intel's popular 486 microprocessor, analysts say.

Compaq, the nation's second-largest personal computer manufacturer behind IBM, is expected to play an especially important role in determining the direction of the upcoming computer price war.

With a gross profit of more than 26 cents on every $1 in sales, Compaq has the flexibility to cut prices without losing money on sales. In contrast, AST Research, the Irvine, Calif.-based computer maker that employs 1,800 people in Fort Worth, had a gross profit of less than 14 cents on every $1 in sales during its most recent quarter. Therefore, it has less room to reduce prices.

Compaq's move to cut prices could help it grab the top spot in the PC manufacturing business, said JoeAnn Stahel, senior analyst with the InfoCorp market research firm in Dallas.

``Compaq is determined to be the price-leader, and they appear well on their way,'' Stahel said. ``They could be No. 1 in 1995 and well could make that goal by the end of this year.''

Last year, Compaq sold 3.7 million machines, garnering 9.4 percent of the market, according to the Dataquest market research firm in San Jose, Calif. It was immediately behind IBM, which held 10.8 percent of the market, selling 4.2 million personal computers worldwide.

Compaq's 22 percent price cuts apply to parts of its Prolinea product line, which are desktop systems sold primarily to corporate customers. But some of the Prolinea cuts are as small as 4 percent.

The company's Deskpro XL model will be cut in price between 7 percent and 11 percent, while the Deskpro XE models will drop between 7 percent and 18 percent.

Notebook computers and sub-notebook computers, sold under the Contura and Contura Aero names respectively, will be cut in price by up to 17 percent.

by CNB