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Compaq trims server prices

Saying it's reached its goal of reducing inventory below four weeks' supply, Compaq cuts prices by as much as 14 percent.

Compaq cut prices by as much as 14 percent on select server models, saying it had reached its goal of reducing inventory below four weeks' supply.

The price drops follow a 46 percent increase in second-quarter server sales from the year-earlier period, the Houston-based computer maker said in a statement. Too much product in the "channel," the network of resellers that manufacturers rely on, hurt first-quarter sales and earnings.

Last month executives said that end-of-the-quarter inventory levels, or the amount of computers stuck in retail and distribution channels, stood at a three-and-a-half-week backlog worldwide, down from a seven- to eight-week backlog at the start of the quarter and below the company's goal of four weeks.

On the low end, the price for Compaq's Proliant PL800 with a 350-MHz Pentium II processor fell 14 percent to $2,869 from $3,317. The system comes with 64MB of memory and a 4GB hard drive.

Specs, prices on Compaq servers
Model Processor/ hard drive Memory Old price New price
PS200-SB 233-MHz PII, 4GB 64MB $4,373 $4,145
PL800 350-MHz PII, 4GB 64MB $3,317 $2,869
PL1600 300-MHz, 8GB 64MB $4,997 $4,628
PL3000 333-MHz, 27GB 256MB $9,960 $8,953
PL6000 2 x 200 1MB Pent. Pro, 56GB 256MB $26,904 $23,563
Source: Compaq

On the high-end, the price of its PL6000 model using two Pentium Pro processors, 256MB of memory, and 56GB of hard disk storage was cut by 12 percent to $23,563 from $26,904.

Earlier this week, Compaq said it had begun shipping its first servers using Intel's most powerful chip, the Xeon Pentium II. Previously, they had been delayed by a glitch in the chipset that goes with the Xeon.

A four-processor PL7000 system sells for about $51,000. This robust configuration includes four 400-MHz Xeon processors, 1GB of memory, and 100GB of hard disk storage.

Though still the No. 1 Intel-based server vendor, Compaq saw its market share shrink in the first quarter due to an overall industry slowdown and an inventory glut. The PC giant's market share declined to 29.7 percent from 31.5 percent for the same period a year ago, according to International Data Corporation.

In July, Compaq rebounded slightly, as the company made better-than-expected progress in bringing down inventory backlogs in its commercial PC business, which hurt the company's competitiveness and dampened earnings during the first half of 1998.