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HP slashes Intel server prices

So what was Carly on about last week?

HP is shaving prices on Intel-based NetServer prices from 3 per cent to 22 per cent in the US, CRN reports.

And it's torching its components price list. New prices vary from 5 per cent to 51 per cent cheaper than before. The cuts take effect immediately. HP says it will maintain margins as it is passing on component price cuts to customers.

But how come it is returning to the price war when only last week CEO Carly Fiorina was telling analysts that the company was withdrawing from this front?

Answer: "We don't live in a vacuum," Marc Jourlait, director of HP's NetServer Business in North America, told CRN.

Exactly. HP is not going to lose market share to its competitors willingly, whatever the management tells the financial world.

The same goes for Compaq. Last week we queried the artfully leaked message from CEO Michael Capellas to Merrill Lynch analysts that the company was quitting the price war. We thought this was a dumb move.

We now understand that Compaq has no intention of giving Dell a clear run, after all. An email composed by a Compaq sales rep circulating a major multinational reseller reassures employees there that "it is business as usual" so far as the vendor is concerned on pricing.

So what do we have here: two major hardware vendors saying one thing to the financial community and behaving quite differently on the battlefield.

Battered by lower profits and in many cases, the companies will do what Wall Street want. Up to a point.

The inference we draw is that the Fiorina and Capellas statements were smokescreens: Wall Street wants to see the tech companies focusing on value, as opposed to growth, strategies. It wants to see job cuts, and it wants to see companies look to profits first, market share second.

However, in the PC market, size and profits are intimately linked. Compaq and, less so, HP have huge services businesses erected on the back of hardware sales. Walk away from a deal and you risk losing an account in the long-run to a more aggressive rival. ®

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