Prices for pre-Vista computers are expected to fall ever-lower for the holidays, but analysts were divided Friday on whether cuts will encourage holiday sales.

According to Current Analysis analyst Samir Bhavnani, 70 percent of notebook sales for the holiday quarter will be under $1000, compared to 22 percent for the same quarter in 2003. Of desktops, 50 percent will sell for less than $500, compared to 28 percent in 2003.

And “less than $500” means way, way less. Mr. Bhavnani said desktops could dip to $99.

Since the Windows Vista operating system won’t be available for consumers until January, the thinking goes, they’ll be willing to purchase a dirt-cheap machine beforehand and upgrade later. The move also helps sellers clear shelves of non-Vista-ready machines in preparation for January.

PC vendors got their lump of coal early with confirmation that Vista won’t be ready until after the gift-giving season (see Redmond Fails To Please). But the attempt to entice do-it-yourself computer users may not work, some observers say.

“Money that would have been allocated to a holiday-season computer purchase will often not be saved for early 2007. Instead, it will go toward another type of gift—most likely not a computer,” said Carmi Levy, senior research analyst at Info-Tech Research Group.

Roger Kay, founder of research firm Endpoint Technologies, said there are specific parameters consumers will likely look for in a dirt-cheap computer.

“They’ve got to be not just Vista-compatible, but Premium-ready,” Mr. Kay said. The latter category ensures that consumers can use the highest-end form of Vista, which guarantees the kind of sophisticated graphic capabilities that increasingly more consumers are demanding for self-generated, YouTube, and Internet-sold content.

And updating operating systems may be simple for self-professed geeks, but the average user is going to be wary about do-it-yourself upgrades. Most may rather wait to buy systems with Vista already built-in—if not in January, than perhaps as late as holiday season of 2007, some say.

From the vendor standpoint, too, cheaper prices may not make sense. After all, PCs suffer hair-thin margins, and mass producer Dell has come under fire with its strategy of lowballing in order to gain market share, even at the expense of revenue and profit (see Dell’s Price Play, Will Dell Get Its Groove Back?).

Then again, the PC industry has been full of surprises.

“As we’ve seem time and again, manufacturers seem to be quite adept at identifying additional economies of scale within their supply chain and manufacturing process,” Mr. Levy said.

“I think some of the holiday buying will dissipate into next year,” Mr. Kay added.

Those interviewed were unanimous about one thing, though: Apple’s likely success.

Though Apple’s Mac sales were disappointing last holiday season, failing to meet analyst expectations of at least 1.5 million units sold, company has already proven it can entice consumers with Intel chips, the latest Mac operating system, and even a few new models (see Mac Attack).

However, Apple computers are still pretty pricey. The cheapest, monitor-less Mac Mini starts at $599, six times more expensive than the bargain-basement discounts Mr. Bhavnani expects.

The real question is if holiday buyers will choose to believe that you get what you pay for.

Contact the writer:ECubarrubia@redherring.com

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