INDUSTRY VIEWPOINT - The buck stops somewhere else

Luke Ireland, a director of Evesham Micros, gives his opinion on Compaq's price increases (PC Dealer, 26 August):

Last month, Compaq sent an email to resellers, informing them it was being forced to raise prices due to an Intel price hike on its Pentium II 266 and 300MHz processors. The increase, about 10 per cent over one weekend, left resellers facing losses on pre-placed orders.

The Intel Pentium 266MHz processor is, to all intents and purposes, dead and buried. That means entry levels are rising to 300 and above. Intel is trying to split the market in two, with Celeron for lower end processors and the Pentium II for better performance.

So, Intel has ensured demand is outstripping supply for the lower end chips and manufacturers are being forced to put higher speed processors into assembled PCs.

Compaq told resellers it was being forced to increase prices due to Intel's shortage of Pentium II 266 and 300MHz processors. It said the chip giant had consequently raised its own prices to Compaq.

We have been selling Intel for six years and have had prior notice of price changes. I can't remember the price ever going up in those six years - on the contrary, chip prices are always coming down.

So for Compaq to blame price increases on Intel's price hike may seem unjust and enforcing this on resellers with little or no prior notification could be perceived as unfair. Obviously, I don't know when Compaq was informed of these changes, but Intel made us aware of the difficulties we would have in obtaining the Pentium II 266 for orders several weeks ago.

So we have simply stopped advertising this component in machines. The vast majority of our products are sold direct, but for the resellers we do supply, I would like to think we would inform them in advance of the changes. If we accepted an order I would find it difficult asking my sales staff to go back to customers and ask for a higher price.

Intel hasn't said anything to us about putting prices up and I'm not aware of any other vendors suffering a similar fate to that which Compaq claimed in the email to resellers. In fact, I'm sure all manufacturers would have received the same documentation.

In the PC Dealer article, an Intel European representative also insisted the prices for the 266 and 300 hadn't increased, quoting $159 and $209 per 1,000 respectively. From the papers we received, it showed both chips for about the same cost on the price list. Obviously, vendors will choose the more powerful 300 to place in PCs. In this way, Intel will phase out the 266 in a round about way, without actually coming out and saying it's going to stop production.

So, after this information, we have stopped advertising products including this processor, after giving plenty of warning to resellers and customers alike of the availability of such components. When bidding for large tenders, the prospective customers need to be made aware that the specification for the tender may no longer be available at the time of assembly.

Compaq is simply not admitting that this is the case and is putting the blame on Intel de-committing on these processors and raising the price to Compaq to save face with resellers. I'm just happy that we aren't reliant on Compaq. The only time we sell it is when we have a large order that includes its kit.

If you are a Compaq reseller, you may just have to bear the situation and put it, and any losses, on pre-agreed supply deals, down to experience.

But be wary of those emails from vendors laying the blame for price changes at the door of third parties.