Dell slashes prices across most product categories

Prices are falling at Dell Inc. The Round Rock, Texas, company cut prices on just about everything in its product line Wednesday, looking to remain the price leader among hardware vendors.

Almost all products from Dimension desktops and Inspiron notebooks to PowerEdge servers are a little less expensive Wednesday than they were earlier this week, said Bruce Anderson, a Dell spokesman. The size of the cuts ranged from 3 percent on Inspirons to over 20 percent on servers and monitors, he said.

The base price for a Dimension 4600 for home users in the U.S. is now $749, down 6 percent from $799. Dell cut the price of its four-way PowerEdge 6600 server by 22 percent, or about $2,800 for U.S. customers, Anderson said. The cuts ranged in size across different customer segments and geographies, but nearly every type of customer will see some sort of reduction, he said.

Dell's direct sales model allowed the company to take the cost savings from its supply chain efficiencies and pass them along to customers, Anderson said.

The company has been feeling some pricing pressure from its rivals on the server side of its business, said Gordon Haff, an analyst with Illuminata Inc. in Nashua, New Hampshire. IBM Corp. announced this week it is offering current Dell customers a 15 percent discount on IBM equipment if they switch vendors, and both Sun Microsystems Inc. and Hewlett-Packard Co. (HP) have shown a willingness to compete on price at the low end of the server market, he said.

"All of Dell's major competitors have been getting price aggressive, and if Dell doesn't lead on price, it doesn't have an awful lot going for it," Haff said. Price is an extremely important factor in the buying decisions of server customers, but if prices are the same among low-end servers, customers will opt for servers with features that Dell doesn't offer, he said.

In the PC market, HP has become more competitive on price than ever before, but Dell's supply chain efficiencies allow it to regularly beat HP on price, said Toni DuBoise, an analyst with ARS Inc. in La Jolla, California.

By building its PCs when they are ordered, Dell is able to match PC prices with component prices, instantly taking advantage of fluctuations in the price of memory or storage, DuBoise said. By contrast, HP has to build its PCs with the components available, and then ship those PCs to distributors and resellers, losing the opportunity to quickly respond to price changes, she said.

HP admitted Tuesday that aggressive pricing strategies hurt the profitability of its personal systems group in its third quarter. The group lost $56 million [m], but HP vowed to bring the group into the black by year's end.