Prices fall for CD-rewritable drives

Shipments of CD-rewritable drives jumped to unexpected levels earlier this year, while sales suffered--a combination that could mean a happy holiday season for price-minded consumers.

The market for CD-RW drives is so oversaturated that prices of some models have fallen below $100. Best Buy is selling an internal 40x Sony CD-RW drive for $84.92 before a $20 mail-in rebate, as well as an internal 40x Digital Research CD-RW drive for $65.92 without a rebate.

"In the first quarter there was some channel stuffing, where the numbers were unexplainably high, and we're still seeing the effects of a correction," said Wolfgang Schlichting, an analyst with research firm IDC.

CD-RW drives have very nearly become a standard component in PCs that target home users, hence the glut has been exacerbated by poor PC sales, said Gartner analyst Mary Craig.

"PC makers had forecast higher sales in the second quarter than there actually ended up being," Craig said. "So there were plenty of cancellations, which built up inventory. August was especially rough for PC and drive makers."

The traditionally strong back-to-school shopping season proved to be a letdown for PC makers, despite aggressive efforts by retailers. Students also tend to be big buyers of add-on CD-RW drives, and sales there didn't materialize either.

Craig added that CD-RW drives with 48x speeds came out sooner than expected, causing manufacturers to "blow out" inventory below cost.

Schlichting expects the glut to carry over to the fourth quarter and anticipates that there will be further price drops in the coming months.

At the same time, manufacturing processes for CD-RW drives are maturing, which should further lower prices. More and more makers are reducing the number of parts used in the drives making them faster and less expensive.

One bright spot for CD-RW makers could be the business market, where shipments are beginning to pick up.

"The corporate market has been slow to pick up CD-RW drives, but they are just starting to come around," said Schlichting. "If that accelerates, there could be some upside potential." About 15 percent to 20 percent of corporate PCs come with CD-RW drives, but that could grow to 50 percent in the coming months, according to IDC data.

Schlichting said that he expected the CD-RW market to begin consolidating, with some of the smaller manufacturers ending their efforts.

Meanwhile, prices for DVD-rewritable drives have also fallen significantly because of improvements in the manufacturing process, according to drive makers. DVD-rewritable drives have become the new high-end optical storage technology, and computer makers are expected to include such drives in PCs this coming holiday season.

As it gears up for the holidays, Hewlett-Packard has cut the price of its DVD+RW drives by $100, to $349 for the dvd200i and $449 for the dvd200e. HP's first generation drive, the dvd100i, cost $600 when it was introduced in August of last year.