With server sales hard to come by, hardware vendors are fighting to match each others' prices and to offset losses suffered because of discounted used equipment being sold in the reseller market. HP's latest move in the server price war was to offer as much as 31% reductions on lower-end products geared toward serving up Web pages, e-mail, cached data and streaming media, the company said in a statement.
From 12 February, the starting price for an LP1000r server with a 1Ghz Pentium III chip and 256Mbytes of memory sold in North America will be $2,249 (£1,569), the company said. The highest-end LP2000r, with a Pentium III chip running at 1.4GHz and 256Mbytes of memory, is now priced at $3,986 (£2,781). HP made similar reductions on other configurations of these servers, the company said. All prices given are list prices; street prices should typically be 10% lower, according to a spokesman for HP.
HP introduced the LP1000r and LP2000r servers at the start of 2001, offering customers a pair of rack servers that ranged in price from $2,500 (£1,745) for an entry level LP1000r to $5,400 (£3,769) for a top-of-the-line LP2000r.
HP has also slashed prices on its wide range of server appliances, which are simplified servers designed to handle a specific task such as caching files or streaming media. The most expensive server appliance that HP sells is the E-Commerce XML Director SA8250, which was previously priced at more than $39,000. The appliance will now start at $29,499 (£20,591). By comparison, a Web cache appliance formerly priced at $16,000 has been cut to $12,499 (£8,725), HP said.
The price cuts follow similar moves by IBM, which has lowered the cost on some of its Intel-based servers while adding new tools such as its memory expansion technology to the products. IBM singled out Dell Computer as its target with this latest pricing move and could succeed with its strategy, according to one analyst.
"Both IBM and HP are constantly looking at where they stack up against their competitors," said Gordon Haff, an analyst at Illuminata. "It's always hard to undercut Dell, but what companies like IBM are trying to do is come close with a little more intellectual property on the systems."
As for the server appliance price cuts, Haff said that HP may have missed the boat by bringing these products to market a little late.
"You really don't hear a lot about appliances these days," Haff said.
Specialised servers were of value during the Internet build-out and dot-com days, but they are playing less of a role now as companies look to sell more flexible, general purpose servers, Haff said. A general purpose server can handle the same tasks as a server appliance but allows users to run various applications on that server.
"The ultimate goal is to get the flexibility of a general purpose server with the ease of deployment of an appliance," Haff said. "You want servers that let you do what you need at the time, which may vary from day to day."