PC prices are taking a roller-coaster ride after the two market leaders last week announced changes in opposite directions.
As they unveiled sluggish third-fiscal- quarter earnings, Hewlett-Packard Co. officials said the company will hike prices on desktop and laptop computers.
Dell Inc., meanwhile, announced a series of price cuts, from 3 to 22 percent across multiple commercial and consumer product lines, including its OptiPlex business desktops, Dimension consumer desktops and Inspiron notebooks. The Round Rock, Texas, company is cutting printer and projector prices by 10 to 13 percent.
HP, of Palo Alto, Calif., blamed some of its financial struggles on aggressive price cuts earlier this year, initiated to maintain market share, as well as on stable or increasing component prices. The result was a $56 million quarterly loss for HPs Personal Systems Group, a marked decline from the $21 million profit the unit generated in the previous three months.
HP Chairman and CEO Carly Fiorina told analysts the company would no longer chase market share at the risk of profitability. "We can continue to grow that [notebook] business, but we have to do it in a practical way," Fiorina said.
Industry observers speculated that Dells price cuts were in response to HPs woes, but a Dell spokesman said the reductions had been in the works for a while.
Dells moves were more likely in response to a possible softening in the consumer PC market, according to Roger Kay, an analyst with International Data Corp. "Dell has a lot of early-warning systems, so if they see a trend like this, one of the responses is price, trying to stimulate demand," said Kay, in Framingham, Mass. "From Dells point of view, the problems of their competitors are collateral damage."
If that softening of consumer demand continues into the traditionally busy back-to-school buying season, HP may be forced to reconsider the price hikes, Kay said. That could be a problem, given Dells healthier profit margins.