Prices are falling at Dell. The 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 were a little less expensive than they were earlier this week, a Dell spokesman, Bruce Anderson, said.
The size of the cuts ranged from 3 per cent on Inspirons to over 20 per cent on servers and monitors, he said.
The base price for a Dimension 4600 for home users in the US is now $US749, down 6 per cent from $US799. Dell cut the price of its four-way PowerEdge 6600 server by 22 per cent, or about $US2800 for US customers, Anderson said.
The cuts ranged in size across different customer segments and geographies, but nearly every type of customer would 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, an analyst with Illuminata, Gordon Haff, said.
IBM announced this week it was offering current Dell customers a 15 per cent discount on IBM equipment if they switch vendors, and both Sun Microsystems and 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 would opt for servers with features that Dell didn't offer, he said.
In the PC market, HP has become more competitive on price than ever before, but Dell's supply chain efficiencies allowed it to regularly beat HP on price, an analyst with ARS, Toni DuBoise, said.
By building its PCs when they were ordered, Dell was 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.
For its part, HP says that price isn't everything.
"It's not always about price, which Dell clearly feels is its only competitive advantage," the company said. "Unlike Dell, HP has a lot of products and services where price is not the driver - quality, innovation, and the overall quality of customer experience is [sic]. It's a two-horse race and Dell knows it."
HP admitted on Tuesday that aggressive pricing strategies hurt the profitability of its personal systems group in its third quarter. The group lost $US56 million, but HP vowed to bring the group into the black by year's end.