Intel charges Dixons with bloated margins

Retail Mandelson backs up chip vendor's complaints about artificially high PC prices.

The Dixons group and Intel have fallen out following an attack byally high PC prices. Intel's top brass on the retailer's dominance in the UK PC market, claiming the group is keeping PC prices artificially high.

Craig Barrett, Intel chief executive, lashed out at Dixons during the Comdex trade show in Las Vegas, saying the high street giant 'charges ridiculous margins'. He was backed up by Paul Otellini, vice president of the Intel architecture business group, who added: 'Dixons can determine what gets sold and at what price.'

The charges support a damning report from analysts at Inteco, which revealed the average total spend for a PC in the UK was significantly higher than in France or Germany (PC Dealer, 24 June).

A source at Intel UK expressed surprise that the vendor had made the comments: 'I know what would have happened to me if I'd said that. General policy at Intel is not to comment on other companies.'

Dixons was quick to respond to the accusations. A representative said: 'We can make no sense of this comment. Intel is probably interpreting its loss of market share in our stores as a problem in the market as a whole.'

Frank O' Brien, UK sales director at Fujitsu, said: 'What Intel is saying is true. Dixons claims selling a #499 machine brings it into line but it's an out-of-date model. It's a disgrace. Dixons is fudging the issue because it has no comeback.'

Trade and Industry Secretary Peter Mandelson is also embroiled in the dispute. He has referred the case to the Office of Fair Trading.

Analysts were less sure about the criticisms. Clive Longbottom, analyst at CSL, said: 'Six months ago Dixons was getting it in the neck from me.

I think Intel is a bit late on this one. Dixons has listened to criticisms, responded and improved.'

Jeremy Davies, analyst at Context, added: 'It's really bad PR for Dixons' Christmas. Retail is particularly competitive this year with Tiny, Time, Gateway and the supermarkets all gunning for Dixons.'