Dell Ups Ante, Drops Prices 22%

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Computer maker Dell upped the pressure on the rest of the
computer industry Wednesday when it announced price reductions on its
enterprise, small-medium business and consumer products by as much as 22
percent.

The move is sure to increase pressure on other systems vendors, who are
already struggling with eroding margins as a result of aggressive pricing on
PCs.

Shares of Hewlett-Packard , for example, were down by over 10 percent
Wednesday, one day after the company released its fiscal third quarter
results that showed an operating loss of $56 million in its personal systems
group. Company officials blamed pricing pressure and price-slashing on its
desktops and some servers for the drop.

Now, as HP pledges to return the personal systems group to profitability in the fourth quarter, Dell
is moving to cut its Optiplex desktop computers by $50 and up to $550 from
certain Precision workstation configurations, products geared for consumers
and small to medium-sized businesses.

Dell also said customers deploying four-processor servers in data centers
would pay up to $2,800 less for the PowerEdge 6600 — which works about to a
22 percent drop in price. Dell’s rack-dense servers were also reduced by up
to 10 percent.

In other price changes, Dell said cut its prices on Dimension desktops by
6 percent and trimmed another 3 percent on Inspiron notebooks, in a bid to
appeal to consumers and small businesses.

Printer and projector prices were also cut by between 10 and 13 percent,
while its 17-inch flat panel monitor was cut by 20 percent to $399.
For example, the Dell J740 personal inkjet printer is now available for only
$79.

Industry watchers’ heads are sure to swing back to Hewlett-Packard to see how it responds one day after pledging to return the division that sells PCs to profits again. Analysts for Deutsche Bank and other banks noted that HP has to find a way to improve its margins in its personal systems division.

Dell said the majority of price reductions are available to customers
today. Remaining reductions will be available Thursday, Aug. 21.