I've always thought of March as a fairly profitable and stable time of the year. Lots of companies are coming to the end of their financial years, large organisations both public and private are looking to spend their capital budgets before the end of tax and financial year. Unless this year for some unfathomable reason is any different from previous years, the market should be buoyant now.
The anecdotal evidence - with a few odd exceptions - suggests that the market is pretty perky. Mega US dealer Vanstar obviously feels confident enough about the prospects in Europe to open up an office in the UK, Lantec is acquiring dealerships at every opportunity, and many vendors are posting encouraging financial results.
All of this makes the current round of price cutting, which just about all the large PC vendors seem to be indulging in, all the more puzzling and irritating. IBM and Hewlett Packard played follow-my-leader to Compaq's move at the start of the month with price cuts of between 20 per cent and 25 per cent. IBM got really aggressive, promising 'to shake up the industry, and continue to act fast and first'. Then smaller players like ALR really put the cat among the pigeons at the high end with the release of a SMP four-way Pentium Pro server with an RRP of about #13,000 early in March.
But a price cut is not just a price cut in isolation, it has many other knock-on effects and implications, as every dealer knows. There seems to be a dramatic price cut from a big player every 18 months or so, which always makes life tougher than normal on the smaller players for a few months. Smaller vendors don't have the economies of scale and purchasing clout of an IBM or Compaq and are put under pressure to stay competitive.
Nobody needs yet another squeeze on margins and for large dealers there are also inventory problems to consider. It creates an atmosphere of uncertainty for everyone, the customer base begins to wonder what is afoot and can hang back from making buying decisions. Perhaps vendors ought to consider the impact on their customers' businesses before they embark on a war of words as well as prices in the future. Price cuts hit hard at the best of times, but in March they hit hardest of all.
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