Are PC prices falling too fast ?

According to Barron's, PC shipments should be better than expected this year. Research firm IDC revised its figures from 12.2% growth this year to 12.6%, but the growth will come with a cost. Buyers of PCs are drawing sharp competition among the major manufacturers, and that is pushing down price-per-unit.

IDC expects that PC prices could drop as much as 5% per quarter over the next several quarters.

Why? PC manufactures are all piling into high growth markets like China. They find there existing vendors, like Lenovo, and have to drop price to get market share. This strategy works as long as a company can afford it. Firms like Dell (NASDAQ: DELL) that are already facing questions about profits from Wall Street can't take their retail prices lower and lower.

There has been great enthusiasm about the potential of markets like China and India where there is a chance for unit growth which no longer exists in mature markets like the U.S. and Europe. But if prices keep dropping down, market share gains will be a Pyrrhic victory.

Douglas A. McIntyre is a partner at 24/7 Wall St.