Compaq Will Cut Price of Some Desktop Computers

From Reuters

Bowing to competitive pressure, Compaq Computer Corp. said Monday that it is cutting the price of some of its high-end desktop models introduced last year.

The company's decision follows similar price reductions by smaller, rival manufacturers and lower prices for computer memory chips, analysts said.

Houston-based Compaq is one of the major makers of IBM-compatible computers.

Compaq said it is cutting prices on its higher-end Deskpro 386/25 and its 386/20e machines by 3.5% to 12.5% to maintain their competitive position against other 80386-based machines.

The price reductions were the first for the Compaq product lines based on the 80386 Intel Corp. microprocessor, one of the fastest processors in the industry.

"It's just common sense--they can't live in a vacuum," said Edmund Spelman, an analyst at Oppenheimer & Co. "It's obvious that there's a lot more competition in the 386 chip. I don't think it's a signal that they're seeing any hidden weakness," he said.

"Last year, we had a very unusual personal computer market, with strong DRAM (dynamic random access memory) prices, plus exuberant demand, plus conversion to 386 machines," said Nikko Securities International analyst Michael Geran.

David Wu, an analyst at S. G. Warburg, Rowe & Pitman, Akroyd Inc., said Compaq's price cuts on most machines were well within the expected yearly range, with only one, the Deskpro 386/20e, cut more than 12.5%.

"Several off-brand companies started the price moving downhill. When the price of materials goes down, Compaq usually takes prices down," Wu said. "Prices in the PC business go down every year."

Analysts also said the new pricing will make the Compaq products more competitive.

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