HP cuts workstation prices

Hewlett-Packard (HP) reduced prices by as much as 18 percent on Pentium II-based workstations, two days after the chipmaker unveiled its new Xeon processor for high-end workstations and servers.

Like many vendors, HP said it would incorporate Xeon chips in future workstations but did not introduce any new systems on Monday. Xeon models will likely be announced in a few weeks, sources close to the company have previously told CNET NEWS.COM.

Today's price cuts appear to foreshadow coming systems while quickly passing along or even anticipating price breaks from Intel, said Dan Dolan, workstation analyst for Dataquest.

Xeon systems mean the Windows NT workstation market is no longer a "one-size-fits-all" segment, he observed.

"The challenge is why is a 400-MHz Xeon is worth more than a 400-MHz Pentium II. Is that really going to affect a single-end user?" Dolan asked rhetorically, pointing out that the emergence of performance benchmark scores will help vendors educate the market.

HP has also been very aggressive about differentiating itself on cost. The company previously cut prices as part of a broader desktop reduction in early May.

"Any time [HP] can get a price break or know there's one coming, they tend to turn that around pretty quickly," he noted. "The rest will follow suit. People are willing to take the lower margins at the low end."

At the low end, a single-processor 333-MHz Kayak XA-s desktop system falls 9 percent to $2,460. In the midrange XU line, a 333-MHz system drops 10 percent to $3,200.

At the top, a dual 300-MHz Kayak XW drops 7 percent to $7,000. Higher-end systems come with more memory, larger hard drives, and improved graphics subsystems.