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Dell leads rush to sell 1-GHz Xeon systems

Leading an expected avalanche of new systems, the company next week will unveil a workstation based on Intel's new 1-GHz Pentium III Xeon processor, sources say.

Leading an expected avalanche of new systems, Dell Computer next week will unveil a workstation based on Intel's new 1-GHz Pentium III Xeon processor, sources close to the company said.

Intel on Tuesday unveiled the new Xeon processor, which is the fastest version the company offers in this chip class.

Dell can claim bragging rights, but little else, by launching 1-GHz systems first. Other PC makers are expected to offer the 1-GHz processor, which, because of bottlenecks talking to memory and other components, do little to boost performance. The speed bump from current 933-MHz chips to 1-GHz performance also is expected to offer, at best, a nominal speed boost.

Still, bragging rights are important right now for Dell, which in the second quarter became the worldwide workstation leader, as measured by units shipped. That put Dell ahead of Sun Microsystems for the first time, according to market researcher International Data Corp.

Sources close to Dell said pricing for the 1-GHz Precision 620 would be comparable to the 933-MHz model. A dual 933-MHz Pentium III Xeon workstation with two 18GB SCSI hard drives, 512MB of Rambus memory, a 64MB Gloria II Pro 4X AGP graphics accelerator, CD-ROM and CD-RW drives, 17-inch monitor, and Windows 2000 sells for $7,394.

As it did with earlier Precision workstations, Dell will offer only Rambus memory with the systems. A glitch with the Intel 840 chipset prevents Dell and other workstation makers from offering SDRAM as an option.

The Round Rock, Texas-based company next month is also expected to ramp up its entry-level Precision 220 and midrange Precision 420 workstations to standard 1-GHz Pentium III processors. The 933-MHz chip is the speediest offered on both models.

Intel offers two 1-GHz chips: a Pentium III and a Pentium III Xeon. The chips use different architectures. Xeon, skewed more toward server use, offers multiple sizes of cache memory, and Xeons with larger cache sizes can be run in multi-processor configurations.

"From Dell's initial push into the workstation market to the present, the company has been very aggressive with product pricing," according to a report from Technology Business Research. "As a result, the company continues to dominate the NT workstation market, and NT workstations are becoming more of a competitor to the traditional Unix-based workstation product lines."

Workstation race
During the second quarter, Dell for the first time surged ahead of Sun in terms of workstations shipped. Dell, which offers only PC workstations running Windows had 23 percent, according to IDC. Sun, which sells only Unix models, had 21 percent.

Hewlett-Packard, IBM and Compaq Computer followed, with 16 percent, 14 percent and 13 percent share, respectively.

But in PC workstations--those running Intel processors--Dell leads rivals by a large margin, according to IDC. During the second quarter, Dell had 34 percent worldwide market share and 43 percent in the United States. Compaq captured the No. 2 spot worldwide over HP, with 20 percent share. HP and IBM had 17 percent and 14 percent share, respectively.

Two years ago, HP dominated the workstation market as Dell does today.

HP gained success suddenly in the PC workstation market when in late 1997 it rebranded the Kayak XA desktop as a workstation. Competitors sharply criticized the move, as the Kayak XA packed one processor and workstations generally had been regarded as two-processor-capable systems.

In the second quarter of 1998, when HP had 46.5 percent market share and second-ranked Dell had 16.2 percent, single-processor systems accounted for 65 percent of HP's PC workstation sales, according to market researcher Dataquest.

But through better marketing and lower pricing, Dell quickly gained on its rival. A year later, HP's lead eroded by about 20 points, and Dell closed the remaining gap, snatching the PC workstation crown.

HP relaunched its Kayak workstation last September as the company struggled to stave off Dell's advances. At one time commanding nearly 50 percent market share, according to Dataquest, HP watched its lead erode over two years and finally vanish.

Following HP's workstation makeover, Dell also hired away a key HP executive responsible for Kayak's market success.

While Dell leads the market in terms of unit shipments, it still trails rivals in revenue, which could be viewed as a more important measure of success. At the same time, IBM is taking the workstation market more seriously and is seeing the kind of growth that propelled Dell to a leadership position.

During the second quarter, IBM workstation shipments grew about 29 percent year-over-year vs. 8 percent growth for Dell, according to IDC. Compaq and HP both declined, respectively, 12 percent and 32 percent. IBM also has been expanding into new markets, such as video editing and production, and this week announced a bundle with Avid Technology.