Dell price cuts turnscrew on HP

22 August 2003 Dell, the world’s leading computer maker, has cut prices by up to 22% in a move seemingly designed to raise the pressure on one of its main rivals, Hewlett-Packard (HP).

In an intriguingly timed move, Dell launched another offensive in the computer price war just 24 hours after HP said its PC division had slipped back into the red, despite an increase in unit sales.

The price cuts vary from product to product, but in general are steeper for enterprise systems than for consumer lines. For example, the deepest cut in price is $2,800, or 22%, for Dell’s PowerEdge 6600 server. There are also steep price cuts to Dell’s flat-panel monitors and rack servers.

Dell said the timing was “serendipitous”. A spokeswoman added: “When we see an opportunity to lower prices, we do it.”

But the move will inevitably increase pressure on HP CEO Carly Fiorina to match the price cuts. She seemed to indicate earlier this week, when HP’s disappointing third-quarter results were announced, that the PC division’s losses were caused partly by HP’s determination to match Dell’s prices. “In some cases we took prices further [down] than we needed to,” she said.

Dell’s direct sales model makes it easier for it to remain profitable, say analysts, even during a price war. HP, for its part, sells only about one-quarter of its products directly to the customer and so is less able to pass on production savings to its customers.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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