Dell drops da pricing bomb

DELL delved deep again today to punish rivals, announcing cuts that will make the firm even tougher to compete against in Twintel business computing.

Twenty-eight per cent falls off enterprise servers, single-core servers duck 13 per cent, up to 17 per cent comes off Latitude notebooks, and workstations lose as much as 20 per cent of their price.

The changes appear to follow along the lines of Dell's occasional restacking of tariffs that put a stop on the progress of small clone makers. The latest cuts will be bad news for business IT rivals and white-box makers that rely on price for differentiation. Indeed, it's getting harder to make a case for staying sloshing around in this blood bath of a market.

The old Compaq would get blue in the face when hacks would suggest Dell could go lower on pricing than its Texan neighbour. The build-to-order promise was so much hogwash, it would insist -- Dell has the same cost model as the rest of us. But who is left standing now when it comes to beige boxes housing Intel chips and running Windows?

Twenty-odd years after the IBM PC made its bow, the big question remaining is who is big enough and daft enough to take on Dell. Even Big Blue eventually gave up the battle after years of suggesting that its PC business was a way into other, lucrative deals.

The facts would appear to back up Michael Dell's theory that a branded supplier offering low-cost hardware that meets industry standards is the key to success. Direct sales + supply-chain efficiency = the winner QED.

So with Dell still flying, who is left to compete? Carly Fiorina's HP for some strange reason still thought it was a good idea to compete on volume, overturning former Compaq CEO Michael Capellas's feeling that looking for margin was better than volume bragging rights. To be fair the new Hurd herd has built share and grown margin, according to its Personal Systems Group breakout figures, although this is largely on the back of notebook and consumer successes.

Fujitsu Siemens always seems to have the stomach for the fight while some watchers feel that the ‘China effect' will see Lenovo and others overturn the recent economics of the sector. With Dell and other giants setting up facilities in China and regional logistics still key, however, there is precious little reason to believe this to be the case.

There will always be some opportunity for a second-source provider or a firm that sees merit in spending good money in fighting a low-margin scrap. Foraging in the mobile and server spaces also allows a little more breathing space. But we need to get used to the idea that selling PCs is Dell's game and nobody does it better. µ

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