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|
|PL6000||2 x 200 1MB Pent. Pro, 56GB||256MB||$26,904||$23,563|
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.