Dell cuts prices across range of products

The PC giant slashes prices by up to 22 percent on servers, a day after rival HP blamed its disappointing financial results on reducing prices too aggressively.

Richard Shim Staff Writer, CNET News.com
Richard Shim
writes about gadgets big and small.
Richard Shim
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Dell on Wednesday cut prices across a range of products, a day after rival Hewlett-Packard blamed its disappointing financial results on reducing prices too aggressively.

Round Rock, Texas-based Dell slashed prices by up to 22 percent on servers aimed at large businesses and up to 6 percent on desktop computers for small to medium-size businesses. The company lowered prices on notebook PCs by up to 3 percent and trimmed up to 13 percent off printers and projectors.

Most of the cuts were effective Wednesday, with the remaining reductions to occur Thursday.

"The efficiency of the Dell model has enabled us to continually reduce prices and return savings to the customer," Kevin Rollins, chief operating officer of Dell, said in a statement.

While it's difficult to challenge Dell on the efficiency of its business model, the price cuts were meant in part to be a message for chief competitor HP, said Toni Duboise, an analyst with research firm ARS.

"This is meant to intimidate HP to a certain degree, saying we can still cut prices...HP just said they were trying to beat Dell (through price cuts), and they paid for it," Duboise said, referring to HP's disappointing third-quarter financial results.

HP launched an aggressive new PC pricing strategy during the third quarter ending July 31, offering desktop PCs at prices as low as $349. The move, designed to crush competitor Dell, backfired when component prices failed to decline as quickly as HP expected during the quarter.

Duboise said that prices on components, such as high-end memory, select optical drives and some processors, are expected to drop, which is partly why Dell is able to make these cuts. But, she added, Dell's build-to-order model gives it room to cut prices with one component and increase it with others.

For example, a base system price can drop, but if a buyer adds more memory or picks a higher-end processor, Dell can increase the cost of the overall system and make up for the price cut.

Dell spokeswoman Wendy Giever said the price drops were planned for some time. She declined to say whether the decision to issue a press release was influenced by HP's announcement Tuesday.

However, HP spokeswoman Rebeca Robboy was skeptical of Dell's move. "Clearly, it's a PR (public relations) stunt on their part."

Giever characterized the cuts as part of Dell's continuous effort to lower prices by reducing its own costs. She noted that Dell cuts prices only when it can afford to do so.

"We don't do it unless we can return value to both our (shareholders) and our customers," Giever said. "Because we are efficient, we can go low."

CNET News.com's Ina Fried contributed to this report.