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HP chops Unix server prices

Hewlett-Packard cuts prices for its midrange Unix servers by about 20 percent, in an attempt to thwart renewed competition from rivals Sun Microsystems and IBM.

Hewlett-Packard has cut prices for its midrange Unix servers by about 20 percent, in an attempt to thwart renewed competition from rivals Sun Microsystems and IBM.

The price cuts, which HP intends to announce Thursday, apply to the eight-processor rp4705 and rp7410 systems, and to the 16-processor rp8400, said Dimitris Dovas, an HP manager for midrange servers.

At the same time, the Palo Alto, Calif.-based company has expanded its capacity-on-demand system, which should improve how computers respond to abruptly increasing workloads and make it possible for buyers to better customize their systems.

HP leads the market for Unix servers that cost between $100,000 and $1 million, according to researcher IDC, garnering $3 billion in revenue in 2002. The No. 2 seller, IBM, took in $2 billion, and third-place Sun racked up $1.6 billion. HP has kept the No. 1 spot in the midrange market for six years, according to Jean Bozman, a research vice president at IDC.

But as a result of curtailed corporate spending and rising pressure from Intel servers, Unix server makers are slashing prices to be more competitive. Sun cut its Unix server prices in February, and IBM did so in January.

"HP is seeing very tough competition from both Sun and IBM for Unix market share," said Technology Business Research analyst Bob Sutherland. Some of its competitive moves are likely geared to keeping customers who have purchased Compaq's AlphaServer Unix systems (a product line HP acquired in 2002) from fleeing to other server makers, he said.

"HP is...suffering from a drop-off of Alpha sales and is seeking to try to shift a lot of those customers over, most likely leading with price, options and flexibility," Sutherland said.

The company's price cuts were effective April 1 in North America and Europe, and will happen in the Asia-Pacific region April 7, Dovas said. The cuts were made because HP dropped processor prices 5 percent to 25 percent and memory 20 percent to 25 percent, he said.

The changes pave the way for higher-end server systems coming later this year. HP's Unix servers today use PA-RISC 8700 processors, but upgrades this year will let customers install the PA-RISC 8800 "Mako" successor, a chip that has two 8700 processor cores etched into the same piece of silicon.

That move will effectively let a customer convert an eight-processor system into a 16-processor machine, for example. It follows a similar step that IBM already took with its Power4 chip, that Sun is taking this year with the UltraSparc IV, and that Intel will take in 2005 with an Itanium-family chip code-named Montecito.

HP's 8800 chip, "Mako," will debut in the top-end Superdome system, which accommodates as many as 64 8700 chips, but will effectively become a 128-processor system with the dual-core 8800 chips.

Program switch
In another move designed to ease customers' wallets, HP expanded its capacity-on-demand program. Until now, customers could switch on installed but unused processors, paying list price for the processors only when they went into use. Under the expansion, customers will be able to switch on entire "cell" boards, which include four processors and accompanying memory, Dovas said.

The program addresses a situation in which a customer might switch on a new processor but not have sufficient memory to take advantage of it. Buyers don't have to pay a premium for the extra capacity, Dovas said.

About 50 percent of Superdome customers buy servers with the capacity-on-demand option, Dovas said. For midrange systems, about 20 percent to 25 percent do so. For low-end systems, only 5 percent or 8 percent do, he said.

In addition, HP has introduced changes to make its supply and manufacturing chain more efficient and is now promising to deliver customized configurations of midrange servers to customers within five days of placing an order, Dovas said. In the past, customers could get certain standard configurations within that turnaround, but not customized features such as the installation of specific software.

HP hopes buyers will find the option more appealing on the basis that they'll be able to save money by getting new systems up and running sooner, Dovas said.