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 user 2003-08-21 at 10:22:00 am Views: 146
  • #3802
    Dell Cuts Prices Up to 22% in 2-Horse Race
     Dell Inc. cut prices on computers, printers and other products by up to 22 percent on Wednesday, a day after its rival Hewlett-Packard Co. reported a first-ever loss in its PC business after slashing prices too aggressively.

    No. 1 PC maker Dell regularly pulls PC prices down, using its direct-to-customer sales method to undercut competition. In this case, the price cuts come during the crucial back-to-school season.

    While Dell and HP have traded places in recent quarters as the No. 1 seller of personal computers, HP’s PC business slipped to an operating loss in its quarter ended July 31.

    HP’s loss was due partly to price cuts it made to compete with Dell and the lack of flexibility it has in changing prices on systems it sells through its distributors. HP Chief Executive Carly Fiorina said on Tuesday that prices can take three or four weeks to work their way into retail markets.

    “One can’t help but question the timing,” said Needham & Co. analyst Charles Wolf. “A quick response on HP’s part is virtually impossible, so it could really screw up HP’s plans for the back-to-school season.”

    Dell’s price cuts are in part related to that important buying season, said Wolf. He rates Dell a “buy.” His firm has not done banking with Dell, but he owns the stock. He rates HP a “hold” and has not done banking with the company and does not own the stock.

    Dell sells most of its computers directly to customers, enabling it to pass on lower costs of computer parts to them. In the past few years, it has used this method to take market share from competitors like HP and Gateway Inc. (NYSE:GTW – News), which is also losing money on PCs.

    Dell, based in Round Rock, Texas, said its price cuts include lowering desktop computer prices by $50 to $550. Certain computers for large businesses are 22 percent lower in price, while others have been cut by up to 10 percent.

    Price reductions on printers and projectors ranged from 10 percent to 13 percent, and Dell cut the 17- inch flat panel monitor price by 20 percent to $399. It said the Dell J740 personal inkjet printer is now $79.

    The timing of the price cuts was “serendipitous,” a Dell spokeswoman said. “When we see an opportunity to lower prices, we do it,” Dell spokeswoman Wendy Giever said.

    But a spokeswoman for HP questioned Dell’s motive. “It’s a two-horse race, and Dell knows it,” she said.

    Martin Reynolds, an analyst at Dataquest, said the move by Dell did not amount to a price war, but rather called it “a good, well-timed piece of PR.”