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Small PC makers hiking PC prices on hard-drive shortage

By Agam Shah
November 22, 2011 12:25 PM ET

However, even though small PC makers may be the hardest hit, the entire hardware market is affected by the hard-drive supply issue, and larger PC makers like Dell will be experiencing supply problems at some point, Milman said. Customers may be tolerant of slightly higher pricing from smaller PC makers, which typically have a dedicated user base.

"Margins on PC sales have been tight for a decade, this is just one more factor that will separate the strong from the weak," Milman said.

Falcon Northwest, which makes high-priced PCs for enthusiasts like gamers, is one company not immediately impacted by hard-drive shortages. The company serves a dedicated audience willing to cough up a little extra for computers if the PC maker's hard-drive supply ran dry, said Bradd Berdelman, general manager at Falcon Northwest.

Customers are already paying thousands of dollars for computers with the latest graphics cards, CPUs and other components, and hard drives take up a much lower share in the total cost of a PC, Berdelman said.

The company has a few months of hard-drive stock remaining so it doesn't have to raise PC prices for now. But when time comes to weigh hard-drive costs and PC prices, a price rise won't be a strain for customers already paying a premium for high end devices, Berdelman said.

"We can absorb that. It's a whole different thing to squeeze this all into a low-end box," Berdelman said.

The hard-drive shortage has led to an uptick in solid-state sales, which have been stable on price. The price difference between the competing storage technologies is not that significant, so more consumers are opting for SSDs, Berdelman said. SSDs were used in 39 percent of Falcon Northwest PCs sold over the first 20 days in November, compared to 35 percent of PCs sold over the first 20 days in August.

Unbranded PCs made by small companies -- classified as white-box computers by research firms -- accounted for about 17 percent of total PC shipments in the first three quarters this year, according to Gartner. White-box laptops had a 4 percent share in overall laptop shipments, while desktops had a 36 percent share.

Small PC makers could offset higher hard-drive costs with smaller storage or cheaper components in PCs, said Mikako Kitagawa, principal research analyst at Gartner.

"It's up to the vendor on how they are going to reflect the final product price," Kitagawa said.

But the Thailand situation is still in flux, and Gartner is yet to fully assess how long PC prices and shipments will be affected by hard-drive shortages. Dell last week called the hard-drive shortage a "complex" situation that may last a few quarters, and that it would adjust product pricing to reflect the costs.

"We're waiting to see what happens," Kitagawa said.

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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