The bottom appears to be falling out of the personal computer business, as company after company joins the latest round of price cutting.
Most of the major computer companies have slashed prices or created families of low-cost computers in the past month, and company officials are vowing to keep cutting prices until their competitors blink.
Unlike the airline business, where fare wars typically are brief and furious, the price war in the personal computer business likely will continue for some time.
Also unlike the airfare wars, which typically end with prices rising again, computer prices likely will stay low even after the dust settles.
Dell Computer Corp. recently unveiled plans to undercut the new price threshold set by its rival, Compaq Computer Corp.
Dell introduced a family of machines called Dimension by Dell. The Dimension computers, which include five desktop models, three floor-standing systems and a pair of notebooks, are intended to appeal to home, home office and small business customers. The Dimension computers are roughly equivalent to the Prolinea computers introduced earlier by Compaq.
The base machine in the Dimension by Dell family is built around a 25-megahertz Intel 386SX microprocessor, with two megabytes of system memory (RAM), an 80-megabyte hard disk drive, two diskette drives and room for three more drives, a Super VGA color monitor, keyboard and mouse, four expansion slots and the DOS and Windows operating systems. The price for the base system is $1,259.
Compaq's base system, which is comparably equipped, has a suggested list price of $1,690. Dell's advertising emphasizes the price difference.
But Compaq sells through dealers who have the option of offering discounts, while Dell sells directly to the customer at the stated price, except to big corporate customers who can negotiate lower prices for large purchases. If a dealer discounts the Compaq price by 20 percent, the cost difference between the Compaq and Dell machines is much narrower.
Either way, the customer gets a full computer system for less than $1,500, or about half what a comparable system cost a couple of years ago.
For those who want more power, Dell offers the Dimension 486DX/33. It has a 33-megahertz 486DX chip, four megabytes of system memory, a 120-megabyte hard disk, two diskette drives, four drive bays (bays are internal spaces for extra hard disks, tape backup systems or a CD-ROM drive, for example), six slots, an "Ultra VGA" color monitor and DOS and Windows. The price is $2,099.
Dell and Compaq start to part company at the level of floor-standing machines, which Compaq does not offer in the Prolinea line.
Floor-standing machines, also called tower systems, often are used as hubs on local area networks. Such designs typically have more memory, hard disk capacity, expansion slots and processing power than normal desktop machines, since they act as central repositories, or servers, for information and processing power on the network.
Dell's 486DX2/50 is a tower system based on the Intel "clock doubling" technology, which takes a 25-megahertz 486DX chip and makes it run twice as fast.
With eight megabytes of system memory, a 212-megabyte hard disk, six bays and six slots and all the other standard features, the Dimension 486DX2/50 costs $2,799.
All these prices include telephone technical support and a free year of on-site service and repair. The computers come with a 30-day money-back guarantee.
The obvious question is, what is the user giving up by choosing a Dimension by Dell machine instead of the mainline Dell brand, which costs substantially more?
Similarly, what is lacking in the Prolinea series that accounts for the price difference between a Prolinea and a Compaq Deskpro machine?
Compaq's differences are fairly easy to measure, since they are primarily technical. The user gives up the ability to upgrade the main processor, from a 386SX, for example, to a 486DX.
The Prolineas also lack the Deskpro's fast graphics, sound capabilities and other advanced features. So the savings come at the expense of technical features.
The Dell dichotomy is less easy to explain, since the Dimension computers appear to offer almost all the technical features of Dell's more costly computers.
Dell systems have some advanced features that appeal to advanced users, but most people do not even know they are there.
The difference between Dimension and Dell systems, which may not be of interest to people who shop mainly on the basis of price, appears to be in the area of customer support.
Dimension customers get what Dell calls basic support; by Dell's standard's, basic is the equivalent of the best support offered by its competitors.
Customers who buy Dell's flagship line are eligible to receive a broader range of services, recently expanded, which include guarantees -- not promises -- that technical support phone calls will be answered promptly and that the computer will be fully compatible with any hardware or software the customer uses.
Boiled down to basics, if a buyer can afford to wait two days for a repairman to show up, the Dimension is a smart choice. If the buyer can't afford to be out of business for more than 24 hours and wants the assurance that any conceivable problem will be fixed promptly, get the Dell.