Smart Move? Compaq
Expected to Make 25% Cut
on Workstation
October 05, 1998, Issue: 810
Section: News
Workstation price war coming -- Compaq Expected To
Make 25 Percent Price Cut; Follows HP And Dell
Reductions
Joe Wilcox
Houston -- The highly competitive PC workstation market may be
ripe for a
price war.
Compaq Computer Corp. will fire the latest salvo. This week the
company is
expected to cut workstation prices by up to 25 percent, with the
lowest cost
models starting around $1,800, and unveil a 400MHz Xeon
workstation for
$3,600, said company executives.
Pressure in the workstation sector has been mounting for months as
Intel Corp.
has slashed processor prices and Dell Computer Corp., Round Rock,
Texas, has
reduced workstation prices twice a month, analysts said.
Meanwhile the PC workstation leader, Hewlett-Packard Co., Palo
Alto, Calif.,
cut prices on its Kayak workstations about once a month since May.
HP's Kayak XU, for example, with a 333MHz Pentium Inside
information
processor, 64 Mbytes of RAM and a 4.5-Gbyte hard drive, sold for
$3,556 in
May and $3,189 in July. With a higher-speed 350MHz processor, a
similar
configuration sold for $3,087 in September. By comparison, the Dell
Precision
WorkStation 410 with 400MHz Pentium II processor and 21-inch
monitor sold
last month for $3,617.
Vendors are finding that unlike the Unix space, where graphics
capability is the
big differentiator, the NT workstation market is affected by other
factors.
Prices are more volatile, and the differences between competing
models often
are more confusing, analysts said.
"We definitely have seen a more regular price reduction over time in
the
workstation market than in 1997," said Chandler Hall, executive
director of
product marketing for Intergraph Computer Systems, Huntsville, Ala.
"In 1998,
we've seen more price cuts and more competition. Now we have to
meet
everyone's reduction, and we didn't have to do that before."
Jay Moore, analyst for The Aberdeen Group, Boston, said the $3,600
price for
the Compaq SP700 is an attempt to win back workstation market
share.
"As Compaq goes to market with a $3,600 price, what we're looking
at is
Compaq's attempt to get themselves back in the game," Moore said.
Compaq, based here, dropped to fourth place from second place in
workstation
shipments and revenue during the second quarter, said Peter
ffoulkes, analyst at
Dataquest, San Jose, Calif.
The company lost momentum as it restructured its product line and
as migration
to the next-generation, highly parallel systems architecture delayed
Xeon
workstations, he said.
HP and IBM would not comment on whether they would be making
workstation
price cuts in the near future. Compaq would not comment on
unannounced price
cuts.
"If there's a price war, it's only going to be the two of them [Compaq
and Dell],"
said David Witzel, research analyst for D.H. Brown Associates Inc.,
Port
Chester, N.Y. "I would hope there won't be a price war, because it
will shake
out some companies."
Compaq's gambit could be risky, Witzel said.
"If there's going to be a price war, Compaq had better have an ace up
its
sleeve," he said.
Compaq's ace may be aggressive pricing on the low end of its
workstation line
that opens up the potential for higher-end sales and solutions,
analysts said.
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