No PC price war in the Middle East

Apparently, prices on PCs have been reduced drastically following Intel’s cut on P4 prices. Actually, dealers are just looking to dispose of excess inventory and prices haven’t dropped all that much.

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By  Vijaya George Published  September 20, 2001

It is widely believed that the local PC market has rushed itself into waging a price war following Intel’s announcement in August that it had slashed prices on the Pentium IV processor by 39%. One example is a leading supermarket chain, which has slashed prices by a liberal $400, resulting in a Pentium III PC brand being made available for as little as $545 while smaller vendors are grudgingly making price reductions between $100 and $150. But this is no attempt at a price war. Local vendors and distributors are merely scrambling to move their inventories before Intel cuts the price on the P4 by another 23 per cent in October.

Intel’s announcement comes in the wake of a general recession in the world market and stiff competition from AMD. Realising that the 850 chipset (which it had built to allow the P4 to interface only with a high performance memory like RDRAM) was turning out to be very expensive for consumers, it introduced the 845 chipset so as to allow the P4 to interface with the less-expensive SDRAM as well.

“The launch of revised pricing for P4 and the expected launch of Intel 845 chipset enabling SDRAM usage for PCs is expected to make the P4-based systems reach aggressive pricing levels,” clarified Eric Tien, managing director of Acer Computer Middle East. “Therefore, dealers, resellers and vendors who carry excess inventory will be forced to move existing PIII-based systems in line with the renewed market reality. This may give us an impression of an impending price war whereas it could be a race to liquidate stocks.”

Compaq Middle East seems unperturbed by the announcement stating that such price reductions are “a natural process in the PC market.” There is no doubt that local resellers have been dealt a heavy blow this year and have been compelled for a second time to reduce their prices. But the Middle East region has not seen such drastic cuts in prices as the rest of the world. As a sales person at the Dubai-based reseller Computronic points out, “prices have only dropped by about $110 on branded products and that is no price drop at all.” Big brands are defending their price revisions by stating that their costs include excellent after-sales support and other value-added services.

Despite disturbing trends in the IT market globally -- the decline in PC shipments worldwide followed by Intel’s announcement and now, Hewlett Packard’s acquisition of Compaq -– the Middle East region stands insulated by the fact that its IT industry is still in the process of being developed to international standards. As a result, the demand for PCs is growing steadily in the region.

Statistics show that the growth rate in the UAE for PCs is currently 28 per cent and about 20 per cent for the rest of the Middle East market, while in the rest of the world, it is a poor five per cent. Spending in information technology in the UAE is projected to grow by over 20 per cent during 2001 to $816.32 million and to $1 billion in 2002. A recent study by the International Data Corporation shows that the UAE’s IT spending will be over one-fourth of the $4.57 billion IT expenditure for the entire Middle East region.

The initial panic is over and prices have stabilised once again. If there is a slump in sales for the moment, vendors attribute it to the upcoming Gulf Information Technology Exhibition (GITEX) as most consumers wait to get the best deals at the GITEX Computer Shopper, which will be held between October 13 and 19. With more than 80,000 visitors expected at the Computer Shopper 2001, IT vendors are sure not to be disappointed.

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