PERSONAL computer salespeople have had to learn to swim with the sharks this year in what has become a cutthroat market with declining prices and, PC market watchers say, there is more rough water ahead. ''The trend on PC prices is one of continuing decreases,'' said Saiman Hui, managing director of the International Data Corp (IDC) research company. Vendors began experiencing problems in 1989, said Compaq product manager Stewart Beck. ''Other manufacturers, especially Taiwanese firms, came in and started taking the market away from companies like us and IBM and Apple,'' he said. Compaq president and chief executive Eckhard Pfeiffer said that his company did not have its marketing ''act together'' in identifying and pricing what customers needed. Instead, he said, Compaq offered whatever computer companies made and at the prices they recommended. ICL's Jeremy Renwick, marketing manager on the client-server side, said ''the industry went to an IBM PC standard land compatibility'', and companies like Dell and Acer began producing basic computers at a lower price. By the middle of 1992, the first signs of a price war had emerged. Apple and Compaq looked at dropping revenues and knew it was time to fight back, Mr Beck said. ''June '92 was really the turning point for us,'' he said. ''The Prolinea and Deskpro were the first lines in an era of models designed to meet users' needs; designed to be cheap as possible but good quality. Our objective was to engineer out as much cost as possible, go for bulk sales and use the Compaq name.'' In the beginning, the strategy's success surprised even its planners, he said. ''We couldn't meet the full demand, and worldwide it went beyond our expectations.'' Taiwan's cloners had begun to suffer because they could not meet the challenge, Mr Hui said. ''The golden time they had has gone forever, and many of them have gone down the tubes,'' he said. ''When the big firms went for volume and re-engineered their manufacturing process and sourcing, the clone manufacturers couldn't keep up,'' said Mr Renwick. ''Only about seven per cent of a PC's cost is labour, and the clones can't trim that any more.'' Mr Beck said: ''There'll be no return to the days of high margins - if any of the big players get complacent'' they'll be overtaken.'' Beyond greater efficiency, lower margins and better market analysis, ''technology has been driving cost down''. In addition, everyone agreed that ''we're facing an unprecedented erosion of the life cycle of the PC'', and ''shorter windows of opportunity for products'', Mr Beck said. Mr Renwick said he was not sure new technology was the reason for the change.. There was no ground-breaking PC technology coming out now, just refinements that were ''coming to market faster and faster''. According to IDC figures, about 116,760 PCs were shipped last year - a growth of 63 per cent over 1991. While the figures were not in yet for 1993, Mr Hui said he expected at least a 50 per cent increase. Average system value including work stations, had fallen by five per cent this year. ''That doesn't seem a big figure but if (you) look at specific models the fall is much larger - as much as 20 per cent on 386 machines,'' he said. Since the beginning of this year, Mr Renwick said the price of top-of-the-line 486 machines had fallen nearly 12 per cent. An examination of Compaq's prices from mid-1992 showed just how much the market had been shaken. In June last year, an entry-level Prolinea 386SX with 4MB RAM, 84-120MB hard disk, mouse and bundled DOS and Windows was listed at US$1,329. For another US$60 today, a buyer could pick up a Presario 833 with a 486SX/33 chip, 270MB hard drive, four MB RAM, separate video bus and board, CD-ROM drive, Sound Blaster, Windows, DOS, games, Windows Works and CD-ROM disks. RAM has generally increased across the range, with more hard-disk capacity and more software requiring more memory. ICI, Compaq, and most of their competitors are bundling software into their machines. Other features like smart start-up programs, especially on business servers, are attracting buyers. The smart start ups make it easier to set up networks. While warranties have become more prevalent and big firms are finding people will pay a little more for a good name and reputation, there is a thin line between disaster and success in the PC wars. Consumers were reaping the benefits of the PC battle for market share, but down-the-road buyers may be hurt by the competition, Mr Renwick said. ''What customers have to realise is that, as vendors get pressured on margins, there will come a point when quality might suffer and eventually the company will fail.''