Relatively flat growth in the server market has seen vendors scrambling to revise their pricing structure - in very different ways.
Latest figures from Gartner's Dataquest indicate the market grew only three per cent compared to Q1 2000, and declined 17 per cent quarter on quarter.
The results come as vendors such as Compaq and Dell move to position themselves in the pricing stakes. But while Dell has recently increased the prices of its Intel-based servers, Compaq has taken the knife to its prices. Its entry-level servers have dropped from $2500 to $1800, making them the least expensive machines on the market, according to the company.
Compaq has been careful not to sacrifice reseller margins in its latest price drop, said business server specialist for Compaq's industry standard server group, Nicholas Lynch.
"We want to get closer to our
channel, so we are making sure our price leadership doesn't sacrifice our partners' profitability," he said.
Gartner figures show Compaq lost ground slightly in the first quarter this year, but still holds top vendor spot with IBM for 17 per cent market share of Intel architecture servers.
The first quarter in the server market was a tough one, but things may level off in the second and third quarters, according to Gartner server program manager Matthew Boon.
Compaq is keen to see it remains number one in the market, despite feeling the heat from rival vendors.
"It means you can now buy a server for the price of a PC," Lynch affirms. "It is part of a global movement Compaq is making to assert its dominance in the server market."
In light of the Q1 results, Compaq is looking to help its resellers to make sure the market stays buoyant, he said.
"It plays into our strategy to maintain momentum so the market doesn't lull."