There’s been too many signs that can’t be ignored any longer; this doesn’t shape up to be a great Christmas for
the computer industry.

Gateway’s announcement is the last of a series of indicators that earlier projections were incorrect.

I’m Not Buyin’ No Stinkin’ OEM Computer!! Why Should I Care?

Can you say “lower prices?” I thought you could. 🙂

I wouldn’t be shocked to see prices on OEM computers slashed in the next couple weeks, and the ripples from that will go through
the component industry. We’ve already seen some stiff price reductions in memory and hard drives; CPUs are likely to follow in the next few weeks; certainly in the next couple months.

Don’t be too surprised if you see a lot of OEM specials available. I mentioned that dual-head G450 were plentiful a few days ago; I strongly suspect that was IBM dumping excess inventory.
You might want to take a look at those OEM companies that aren’t big on built-to-order, and see what high-end components their computers are using. You might see them for sale at your friendly Internet reseller shortly.

This is an odd Christmas season. The only new item resellers can flog are Willamettes, which will be a tough sell. AMD sales will be constrained at the low end since an integrated socket A board wasn’t available for Christmas. TBirds sales will
be OK, but the smart money is waiting for Palomino DDR systems.

On the Intel side, there’s nothing new, and I wouldn’t be surprised if the smart business money is waiting for something seriously new, too.

Processor Oversupply

I’ve written a number of times before about developing overcapacity in the CPU industry. If we look at the following quarter, we see AMD and Intel capable of making in the neighborhood of about ten million more processors than the world is likely to buy in the first quarter of 2001.

Even if the computer market does better than expected in the normally slow 1Q; that’s a pretty big overhang, and it’s going to be awfully tempting for one of them to start a price war to move inventory. That’s not inevitable, just likely.

What Should I Do? I Need Something Now!

If waiting is an option, wait, but in all fairness, with the delays in getting Palomino and DDR out, waiting for something might be more like March-April than January-February.

Just what would you be waiting for? A 1.5Ghz Palomino/DDR system will probably get you in the neighborhood of 40%-50% more firepower than you’d get with a current 900-1Ghz system today.

(Of course, especially for gaming, that might be an expensive proposition. Besides the CPU and DDR mobo and DDR RAM, you’ll probably need a new video card to take advantage of the additional power.)

If waiting is not an option, I think the question you need to ask yourself is, “What can I live with for a while?”

I’ve spoken before about “renting” a processor. You can buy a Duron or Celeron pretty cheap now, get one of those, overclock it, and when the higher-end stuff drops in price (maybe faster than you think), buy that.

Memory is awfully cheap now; I doubt we’re going to see much lower than we’re seeing now.

Motherboards are a bit of a problem; the first generation has been out a while, and the second generation is just coming out now.

Look for the sweet spot in hard drive prices; it may be at a higher level than you think. Keep in mind that it’s tough to find a new drive, no matter how small, for much less than $100.

I grabbed some low prices off a price engine for IBM 75GXP hard drives:

15GB: $110
20GB: $124
30GB: $135
45GB: $168

If you move up from 15GB to 30 or 45, you’re paying a little less than $2 per additional Gb. It’s going to be a while before you’ll see new drives costing $2/Gb, and shortly after that time, we’ll probably be using serial ATA anyway.

Video cards have a good “rental” candidate in the Geforce2 MX. You can get one for about $100, and you won’t be hurting too badly while awaiting NV20 (or more likely, some highend GeForce2 card; those prices are cruising for a bruising).

Monitors aren’t subject to rapid price change, they sort of drift down over time.

I’m putting together a system for someone who can’t wait (we’re talking about moving up from a 486 DX2/66), and I’m following my own rules.

I’m going with a cheap Duron, lots of RAM, a big IBM hard drive, and an MX card. I figure I’ll stick in a 1.2Ghz TBird or better in
six months or so when they’re dirt cheap (the upgrade is only to hold off the “how long before it sucks” for another year or so).

We’re not talking about folks needing massive firepower, so this will probably last them very nicely for years.

If you want to hauled regularly before the World Quake Court and commended for your crimes against virtual humanity, a machine like that won’t hold you that long, but it will for a while.:)

Email Ed

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