Perfect storm sends desktop prices diving

Vendor price pressures could benefit corporate IT buyers, say experts

The recent announcement of a $298 (£148) PC available in the US through Wal-Mart created waves because it hit what could be a new low price point for retail-sold desktop systems. However, experts believe that prices will also go on diving in business PCs thanks to intense competition and the rise of laptops and thin-client terminals.

“Prices have gone down consistently in the past two years and vendors are clearly cutting very good deals on tenders so we definitely believe prices will continue to go down,” said Eszter Morvay, senior research analyst at IDC.

“Price drops are often initiated by vendors in order to buy market share rather than through market demand, and they’re often selling under cost to promote other services.”

The trend towards lower pricing is likely to be exacerbated as another sales boom is expected to follow over the next couple of years as large firms kick-start new PC buying cycles, Morvay added.

Also, as firms spend more budget on mobile computing, desktop prices will be pressurised again. However, laptop PCs themselves are also coming down in price, with IDC’s Morvay seeing eight percent drops every three months.

Yet another pricing-pressure factor is coming from server virtualisation and its impact on alternative client devices such as thin-client terminals and blade desktops. HP last week agreed to buy Neoware as server-based computing environments continue to gain acceptance, helped by environmental concerns over running PCs. Thin-client terminal sales rose 38 percent in 2005 to 2.2 million units, according to Gartner.

“There’s probably a saturation point in desktops per capita in the organisation but at the same time many more workers are becoming involved in information work,” said Richard Edwards, senior research analyst at Butler Group. “Many of these don’t require a fully-fledged PC and could use a thin client.”

As if all that were not enough, the One Laptop per Child group developing a $100 laptop last week said it is moving to volume manufacturing. Supporters have in the past suggested that its specification could also be used for very low-cost alternatives to standard PCs in some usage scenarios.