Editorial: No big bucks from the PIII
Considering how many Pentium III systems have been launched in the past two weeks, it's safe to say the latest round of price warfare has begun. However, unlike previous incarnations, the latest Pentium does not guarantee a decent margin.
In the past, resellers could look forward to the latest chip release to help boost decimated margins on their existing kit. Why? Because it's brand-new, super-fast, usually heavily pre-announced and marketed as the hottest piece of silicon this side of HAL. The power user or serious games player doesn't mind forking out the extra cash for the extra megahertz and that is still the case with PIII. That said, those crazy online jesters have begun by slashing most of the margin immediately, which has put massive pressure on PIII pricing for vendors and the channel.
No sooner had the big vendors started proudly introducing their stock than Net retailer Onsale started flogging AST PIII systems at wholesale prices from its AtCost.com Website. Selling kit wholesale is the fastest way into the red, but Onsale is looking unusually healthy for a PC charity.
Apparently, it has $47 million tucked away in the bank, $700 million in capitalisation and no debts - and is the only online vendor advertised on Intel's PIII retail site.
Many resellers are freaking out over the strategy, especially since it's Tech Data that's providing the kit to Onsale. Resellers have a right to be angry when one of the biggest distributors starts supplying the virtual enemy, but they get over it as loyalties in the face of the online surge fall quicker than Premiership referees. The online market is not to be denied and is destined to take a big chunk of sales. If you can't beat them, find a way to work with them. Tech Data is just making sure it's on the online wave when it crests, not under it.
The stalwart of the direct model, Dell, recently did its best to hit out at its rivals when it announced PIII workstations, boasting a 'two chips for the price of one' offer. Dell claimed its range of engineering workstations would come with two PIIIs for the same price as its rivals' single processor systems.
Obviously, everyone is now questioning the intimacy of Dell's relationship with Intel because such an offer needs some kind of special wheeling and dealing.
Hardly good for the new chip, bigger margins theory. In fact, between Dell and the online stores, the latest PIII boxes are not going to be a big money earner except on the high street, where charging too much for technology that a lot of customers - and shop assistants - don't understand, is not unheard of. Either way, it's time to bulk up on the add-ons as the days of raw hardware power adding value disappear.