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Gartner: Apple Hikes PC Prices, Expect Others to Follow

Press release from the issuing company

March 27, 2002 - According to Gartner analysts, Leslie Fiering and Brian Gammage, rising component costs will likely trigger a round of PC price increases. Gartner says where possible, enterprises should speed up purchase plans to avoid the price hikes. Fiering and Gammage offered Gartner’s first take on the subject. On March 21, 2002, Apple Computer raised prices on all its iMac computers by around $100 in response to memory and flat-screen cost increases. “Some vendors have discussed the need to increase PC prices to major customers since the start of March 2002, but Apple is the first to make a public statement to this effect. 2001 saw significant PC price wars, and low prices remain a key competitive tactic in a slow PC market. None of the PC vendors wants to raise prices first, but Gartner believes that higher component costs and paper-thin profit margins will force their hands. Price rises will not signal the end of the price wars but simply a new phase that moves from cost reduction to cost containment. “Memory went underpriced through much of 2001 as a drop-off in demand resulted in a PC oversupply. Since December 2001, however, memory prices have quadrupled and will likely rise even further before the end of 2002. As a result, Gartner estimates that the average desktop PC now costs at least $100 extra to build. The leading PC companies cannot absorb these cost increases and will be obliged to pass them on to users. “Prices for flat screens are also rising as suppliers face growing demand from the PC industry's two growth areas: mobile PCs and LCD desktop displays. Undersupply has already resulted in average price increases of $25 to $35 for different screen sizes since the start of 2002. Together with costlier memory, these increases have forced mobile PC costs up by around 17 percent in three months. “Although Gartner does not consider Apple a bellwether for PC pricing, all vendors face the same economic pressures. Consequently, Gartner expects at least one Tier 1 vendor to break ranks and raise prices by the end of April 2002. Gartner forecasts that the leading vendors will raise average PC prices by at least 10 percent through 2002. Enterprises should accelerate any planned PC purchases so that they occur before the anticipated price hikes.” Gartner, Inc. is a research and advisory firm that helps more than 11,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and consists of 4,300 associates, including 1,200 research analysts and consultants in more than 90 locations worldwide. The company achieved fiscal 2001 revenue of $952 million.