Price Wars

Dell and Apple dragged the US stock markets down last night. Investors are quite rightly concerned about the risk of a price war breaking out in the PC industry. The margins are so tight that no vendor is in a position to fight such a battle.

The concern was so great that Asian stocks were dragged down by Dell and Apple's suppliers. This is with good reason as any pain suffered by Dell is going to be shared with it's suppliers. It could even be that we are seeing the last of any fat, or profit, that existed in the PC industry.

It's not good for Dell in Australia either, the entry of JB Hifi into computer retail is going to put pressure on retail prices. This is going to hit Dell along with Harvey Norman and Woolworths/Dick Smith.

Another issue facing Dell is the three month warranty. Anyone who buys a computer with a three month warranty is almost as dumb as the retailer who tries to sell it. This not going to fly with the ACCC or state fair trading departments.

Personally I'm amazed Dell are continuing to cut prices. It seems to me this is a strategy doomed to failure. It would make far more sense to position the brand as offering good quality at reasonable prices rather than the cheapest.

Then again, I'm not a high paid corporate warrior.