Agency buyers find they're shelling out far less for PCs

Agencies have paid 20 percent less for desktop PCs in the past 12 months than they had
previously, government vendors said, and feds will be able to buy monitorless systems for
as little as $500 before the year is out.

"If you're talking about a 233- or 266-MHz PC, the price points are
outrageous," said Chris Zukowski, a systems analyst in the Corporate Information
Office at the Army's Aberdeen Proving Grounds, Md. "We're seeing prices going back
down six weeks after processors are introduced."

Ranging from $1,500 to $1,800, 266-MHz PCs come with 32M of RAM, 4M video cards and 4G
Enhanced IDE hard drives, said Wallace Welch, a systems administrator at the Commerce
Department's Civil Rights Office.

"But if you want state-of-the-art SCSI hard drives, you have to pay a premium
price," Welch said.

For years, agencies expected to pay an average of $2,500 for a desktop system, said
Mark Thoreson, inside sales manager for Government Technology Services Inc. of Chantilly,
Va. But that figure has fallen to about $1,800 for the PCs that GTSI sells, he said.

GTSI last year had the third highest sales of PC products through the General Services
Administration schedule, according to GSA estimates [GCN, Oct. 27, 1997, Page 8].

The average federal PC sale at Comark Federal Systems, also of Chantilly, runs about
$1,800, said Alan Bechara, the company's chief operating officer and vice president.

The downward pricing trend means some desktop PC vendors must boost sales by 20 percent
just to equal last year's revenue, and they have less price-cutting flexibility on large
buys, vendors said. Companies also are finding it harder to deliver satisfactory warranty
service, said Tony Colangelo, vice president of the federal division at Nexar Technologies
Inc. of Westborough, Mass.

Digital Equipment Corp.'s average desktop PC price to federal agencies is running at or
less than $2,000, said Philip R. Kennett, general manager for the company's federal
personal systems group.

Dunn Computer Corp.'s average price declined from nearly $2,000 last year to $1,900
this year, said Bill Hughes, vice president of sales and marketing at the Sterling, Va.,
company. Despite the lower prices, buyers are getting twice the hard drive capacity and
main memory, as well as faster processors and video cards, Hughes said.

Not every vendor has experienced a drop in PC prices, however.

The average federal price for desktop PCs from Micron Electronics Inc. of Nampa, Idaho,
has been more than $2,500, said Ron Clevenger, director of federal sales. "We've seen
a dip but not necessarily a trend," he said.

Micron last year came in fourth on PC product sales through the Multiple-Award
Schedule, according to GSA figures.

The company recently added ClientPro VXE network clients to its GSA contract, priced at
less than $1,000, so Micron's average PC price also might decline this year. The ClientPro
has a 166-MHz Pentium MMX processor, 32M of EDO RAM, a 1.2G hard drive and a 16X CD-ROM

Some agencies that expect to use PCs for long periods are willing to pay more up front.

The Army's Fort Riley, Kan., plans to pay about $2,500 each for 300-MHz Pentium II PCs
with at least 64M of RAM and 8.5G hard drives, said Norma Ford, a computer specialist at
the Provost Marshal's Office there.

Also, organizations that are short on technical support sometimes prefer to pay more
for brand-name PCs from vendors such as Compaq Computer Corp. and IBM Corp. so they can
rely on vendor support, GTSI's Thoreson said.

Such buyers usually want preinstalled desktop management interface software, Thoreson

But other organizations ignore warranty support and have told GTSI they will replace
inexpensive PCs every two to three years, he said.

Even though the basic desktop PC price has dropped below the $1,000 level and high-end
Pentium II systems with SCSI drives and 100-MHz buses sell for only about $2,000, prices
will continue to fall, Thoreson said.

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