Declining costs show no signs of abating as innovations make today's PC's old hat

COMPUTER PRICES ON SLIPPERY SLOPE

May 04, 1992|By Bill Husted | Bill Husted,Cox News Service

Prices for personal computers are dropping so fast that, to some prospective buyers, it's downright scary.

You've seen the ads. Each month, prices seem to go lower. Some shoppers worry that even lower prices later will make them look like suckers if they buy now.

They have reason to worry. Fast, modern PCs sell for $1,000 or less. The same machines -- just two years ago -- went for $3,000 or more. It's only natural to wonder whether the slide will continue.

The answer is yes.

As new and faster PCs are introduced, prices for machines with older technology inevitably will drop. Some PCs, however, already are flirting with the bottom.

For instance, prices for today's most popular machine -- a PC that uses the 80386SX processor chip, which does the actual computing -- already have begun to stabilize.

"If it's selling for, say, $1,400 today, you'll probably be able to buy it for less than $1,200 next year," said Ed Juge, Radio Shack's vice president of marketing. "But the biggest price decreases in the next year won't be in the 386SXs; it'll be in the more powerful machines."

Mr. Juge said today's nearly state-of-the-art PCs -- built around the 80486 chip -- which sell for $2,400 and more, will be in the "$1,500 and $1,800 price range next year."

"It's always going to cost more to be the first guy on your block with the newest technology," he said. "What happens is that developing a new technology costs multimillions. And the company that develops it tries to get that money back in a relatively short time."

The quick payback for money spent on research and development makes sense. As today's new technology becomes yesterday's, consumers no longer will pay premium prices. Manufacturers try to get their money back while the getting is good, Mr. Juge said.

So, you'll pay extra for the state-of-the-art, 80486-based computer. And computers that once were on top -- those based on the 80386 chip -- have dropped so much in price that they "are awfully close to being a commodity," said George Bond, editor of Computer Buying World, a magazine used by corporate purchasing agents.

"The 386SX is probably about at the bottom of its price curve," he said. "They'll get even cheaper, but I don't know by how much."

Mr. Bond said some buyers spend too much time worrying about price.

"The first thing you have to keep in mind is that, no matter what you buy and when you buy it, within a week it's going to be available cheaper somewhere. And, within six months, the technology that it is based on will be exceeded."

Mr. Bond said consumers could profit from the philosophy businesses use when deciding which PC to buy.

"Decide whether a newer or faster computer is going to increase your productivity," he said. "If you upgrade, will you be able to do the job better, more efficiently? If the answer is "yes," then you probably shouldn't postpone the buy. Computers are relatively cheap these days, but people's time is not."

And you can't totally base your buying decision on speed and power. Old-technology computers -- those with 8088 and 80286 processor chips -- won't be able to take advantage of all the features built into the latest software.

Although Mr. Juge thinks that PCs based on the 80286 chip are fast and powerful enough for most home users, he still recommended a PC with a 80386 or 80486 chip."Those chips offer internal instructions the 80286 doesn't," he said. "As new software comes out that takes advantage of those instructions, they'll be able to use it."

He believes these machines are a safe buy because "there is nothing on the horizon in the next five to eight years that will outdate PCs with the 386 or 486 chip."

Mr. Juge and Mr. Bond said most computer accessories also will keep dropping in price.

As an example, hard disk prices have gone way down in the past year. That's why Radio Shack can sell a computer with an 80 megabyte hard disk for what the same PC with a hard drive half that size sold for last year.

Modems -- the devices that let a computer send data over telephone lines -- also are getting cheaper. Mr. Bond said fast 9600-bit-per-second modems that sold for $1,000 last year, sell for about $350 now. And slower "2400 bit-per-second modems now sell for $60 and $70."

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