The Great PC Price War

Personal computers have never been so cheap -- or sold so furiously

THE CRAZIEST YEAR IN PERSONAL COMPUTING HAS got even crazier. Compaq, which set off a fierce price-cutting war this summer when it slashed its PC prices one-third, has trimmed the tags on some models an additional 32%, bringing the cost of its cheapest desktop machine to below $800 -- a fraction of what customers were paying for PCs with a lot less memory and power just a few years ago.

But there is method in this madness. By slashing prices, big-name U.S. computer makers are not only squeezing out cut-rate foreign "clones," but they are also whipping American consumers into a...

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