Sony to increase PC prices

By Michael Kanellos and Richard Shim, CNet, 8 April, 2002 09:55

NEWS

Sony is raising prices on some of its PCs, the latest company to fall victim to increasing component costs. On Friday, Sony said it would raise prices of notebooks and desktops in the United States and Japan. Some new high-end notebooks have already been increased in price by $100 to $200. The price of other notebooks and desktops will also go up, although desktops will see less of an increase, a Sony representative said. The increases, a rarity in the market, come as a result of increasing demand for memory and flat-panel LCD (liquid-crystal display) monitors. Those two components have been rising steeply in price since late last year, although prices have recently begun to approach a plateau. About two weeks ago, Apple announced that it would be raising the price of new iMacs by $100 because of the rising cost of LCDs and memory. Shortly thereafter, NEC made a similar announcement for its consumer PCs sold in Japan. IDC analyst Roger Kay said that price increases are unconventional but understandable. "PC makers usually never increase prices; they usually just weaken the configurations," Kay said. "But there's not much room to move, and things are thin enough that they have to react quickly. There are tough expectations in this market, where companies have to always offer more for less and at some point it has to reach a bottom. This could open up the idea that prices could go up for more features." Merrill Lynch analyst Joe Osha agreed, saying PC makers "have absorbed a lot of cost." Osha said it's difficult to say whether the trend will last given the reactions of LCD and memory makers. Supplies of flat panels are expected to increase in the third quarter as more factories come online. Chip suppliers to the flat-panel industry are also increasing supply. "The flat-panel industry is spending like crazy," Osha said. Last year, some manufacturers were selling memory for below cost. But prices for memory components are beginning to stabilise. Dell Computer, which has been changing configurations on its PCs to blunt the impact of component costs, said on Thursday that costs have been flattening. The company also indicated that because of changes in its own operations, the company will likely be in a position again to lower costs. Chipmakers Intel and Advanced Micro Devices also plan to whack prices up in April and May, according to sources. Sony and Apple Computer can raise prices more easily than other computer manufacturers. Both have traditionally charged a premium for their computers because they tend to add innovative features -- such as FireWire connectivity ports and video editing software -- before others. Both companies also place a strong emphasis on design. As a result, their customers often focus on price less than the customers of other PC makers do, analysts have said. To save costs, PC makers may also pull rebates on PCs, according to NPD Techworld analyst Stephen Baker. "Rebates give (PC makers) the freedom to change prices quickly in case something happens in the market," Baker said. Sony has already raised the cost of two models of its Vaio notebook line. The price of the Vaio PCG-GRX570 increased from $2,499 to US$2,699, and the price of the Vaio PCG-GRX590 increased from $2,999 to $3,099. Both computers feature a 16.1-inch display. Sony is the first major manufacturer to offer screens this large. Sony spokeswoman Gretchen Griswold said the price increases on notebooks were mostly due to LCD pricing, and that the effect on desktops would be less dramatic and more associated with changes in the cost of memory.

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