Friday, November 25, 2005

Price Wars: The Notebook Boom

If you've been debating whether or not to go ahead and splurge for that new PC book, wait no more.

Today is Black Friday and the price for an entry-level notebook PC has fallen below $400 for the first time ever.

That's great news for you, but a veritable nightmare for PC companies like Dell, which we told readers to sell in the high 30s.

Margins across the industry are sinking as companies resort to lower prices in order to sustain sales volume.

It's a brutal pricing environment in which economic Darwinism is alive and well -- everyone's trying to match the competition.

If the players get married to $399 pricing, the notebook industry will take a turn for the worse.

Nevertheless, we're expecting a blowout year for notebooks.

The average selling price of a notebook PC at retail in the U.S. is expected to fall below $1,000 for the first time this month.

So as long as companies like Dell do what whatever it takes to keep component costs low, we're all smiles.

Heck, stocks aren't the only things we buy.

We're just glad we don't run one of these companies.

As soon as commodity pricing takes over a company/industry, you can kiss those wide profit margins goodbye.

In other words, we're holding off on shares of Dell (although we think they'll be at 35 within 3-6 months, maybe sooner) and going long Best Buy (BBY).

The Minnesota electronics retailer should be an interesting 2-3 session short term trade.

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