From...

May 12, 1999
Web posted at: 9:15 a.m. EDT (1315 GMT)

by Mark Brownstein

INTERACTIVE

Now that PC prices are falling so rapidly, do you expect peripherals (printers, modems, etc.) to be just as cheap?    Of course    Not necessarily    Don't I wish View Results

(IDG) -- With PCs selling for $1000 and under, peripherals such as printers and scanners are starting to seem downright expensive.

"It seems a little awkward to expect a person who pays $500 or $600 for a PC to pay almost as much for a printer," says John Genovesi, vice president of peripherals at Intelect ASW, a research firm.

The same goes for other peripherals. "A certain amount of price disparity needs to be maintained for consumers. If [pricing for a peripheral] comes close to the lower PC price points, it will be a real problem for the general consumer," Genovesi adds.

Tough markets

According to a recent Gartner Group study, a full 50 percent of U.S. households now own at least one personal computer. While this has created a huge potential market for peripheral devices, increased competition has resulted in double-digit retail price drops in multiple categories, including printers, monitors, and fax machines, an Intelect report says.

"A market basket of 36 PC peripheral items showed an average retail price decline of 21 percent in January and February of 1999 compared to the same period in 1998," the report says. During the period, printers dropped in price by 20 percent, monitors by 22 percent, and scanners by 19 percent. The most dramatic drops were on personal organizers, which fell 26 percent in price, and fax machines, whose prices plummeted 40 percent.

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For peripheral vendors, falling prices translate to thinning profit margins, Genovesi notes. And playing up features will not help. "There is very little in the way of product attributes that make one manufacturer's product unique from another, so the only way to get traffic into the stores and to get people interested in a company's product is to keep hammering away at prices," Genovesi says.

So far, increased sales volumes have kept total revenues on par with last year's figures, Genovesi says, but positive revenue growth doesn't appear to be on the horizon. "I don't necessarily think that revenue increases will take place under today's conditions," he says.

Big fish eat small fish

For small vendors, all this spells bad news. Larger companies are now swallowing up fledgling competitors.

"There was an upheaval in the scanner market with companies like Visioneer and Storm that pretty much were a flash in the pan. My thoughts are that we will see major players continue to innovate and be leaders, and that larger companies will absorb the smaller ones," Genovesi says.

For consumers, all this upheaval should mean new features and products. "We will see a shift in innovations," Genovesi predicts. As older technologies fade away, new technologies such as home networking will emerge. With consumers becoming more computer literate, "it will be easier to network within the house and use the computer as a home control center."

In short, Genovesi says, expect whole new waves of peripherals.