IBM Price Cuts Expected in Response to Compaq

International Business Machines Corp. is expected to slash prices today on many of its personal computer products--in some cases by as much as 25%--as a much-anticipated price war begins, analysts said.

IBM will be the first major PC vendor to slash prices in response to a move by Houston-based Compaq Computer Corp., which last week cut prices on several products.

Compaq’s price cuts ranged from 11% to 22%.

In the first quarter of the year, Compaq surpassed IBM as the top PC seller and stayed on top in the second quarter--well ahead of its nearest competitor, Apple Computer Inc.

Analysts said the IBM cuts will be on selected models across the board, with the exception of ThinkPad notebook computers and the PS/1 line. An IBM spokeswoman declined to comment except to say, “We have always said we would remain competitive.”

Personal computer makers are beginning to feel pressure to cut prices of their systems based on the 486 computer chip as the prices for PCs designed around Intel’s next-generation chip, the Pentium, begin to decline and users move to those machines.

On Monday, Dell Computer Corp. introduced a fully configured Pentium-based PC family, starting at less than $3,000. Dell was also the first PC maker to introduce a Pentium-based PC for less than $2,000, earlier this summer.

IBM, Compaq and other PC makers will also introduce more Pentium-based PCs, servers and notebooks this fall.