Sub-$500 PCs dominate back-to-school retail sales

Posted by Wolfgang Gruener

San Diego (CA) - System builders are increasingly betting on a PC price tag below $500 to be successful in the second most important PC selling season of the year: Current Analysis found that the sub-$500 space captured a 54% share in US back-to-school retail sales. No worries, if you've missed it: The day of the value PC has arrived and it is here to stay, says the research firm.

Not too long ago, we ran an article about a mail-in-rebate-packed $100 PC offered by Office Depot and even if you couldn't pick one up for yourself or your children, there were plenty of other PCs in your weekend newspaper than were priced at $300 or less. And the impression of falling PC prices isn't deceiving: Current Analysis, which tracks U.S. PC retail sales, says that computer systems once again saw substantial price drops during this back-to-school (BTS) season.

Last year, 32% of all PCs sold during the BTS period were priced below $500; this year the segment held a 54% in July of this year, according to the market research firm. Average pricing of the BTS PC was $550 this year, down almost 15% from $644 last year. However, system builders and the retail channel did not eat the entire price reduction, as the hard drive size appears to have decreased in some computers over last year. The top selling system this year was an Athlon 64-based computer with 1 GB of memory and a 200 GB hard drive - for $560. This compares to the same system configuration last year - with the exception of a 250 GB hard drive - that sold for $732.

The #2 system on the list - an Intel Celeron with 512 MB memory, a CD burner and a 100 GB hard drive in 2005 was replaced this year by an AMD Sempron system with a 120 GB hard drive. Pricing decreased from $447 for the Intel computer to $381 for the AMD system.

Current Analysis also noted that the general popularity of notebooks was seen in BTS sales as well. The segments share rose from just above 50% last year to 63% in July 2006. However, manufacturers "bought" the market share by decreasing the average selling price of notebooks from $1112 in 2005 to $862 this year.

The market research firm believes that the trend of lower prices will remain for the foreseeable time: Processor price wars, climbing processor inventories, a delayed Vista launch and "and a threat of slowing demand" all contribute to a scenario in which "it is unlikely that the downward trickle of technology and/or price erosion will reverse itself," the firm said.