Dell slashes prices in dig at HP

Dell is cutting prices across a range of products, a day after rival Hewlett-Packard blamed its disappointing financial results on reducing prices too aggressively. Dell has slashed prices by up to 22 per cent on servers aimed at large businesses and up to 6 per cent on desktop computers for small to medium-size businesses. The company lowered prices on laptop PCs by up to 3 per cent and trimmed up to 13 per cent off printers and projectors. The cuts are effective immediately. Kevin Rollins, COO at Dell, said in a statement: "The efficiency of the Dell model has enabled us to continually reduce prices and return savings to the customer."

Toni Duboise, an analyst with research firm ARS said that while it's difficult to challenge Dell on the efficiency of its business model, the price cuts were meant in part to be a message for chief competitor HP. "This is meant to intimidate HP to a certain degree, saying we can still cut prices...HP just said they were trying to beat Dell [through price cuts], and they paid for it," he said, referring to HP's disappointing third-quarter financial results. HP launched an aggressive new PC pricing strategy during the third quarter ended 31 July, offering desktop PCs at prices as low as $349. The move, designed to crush competitor Dell, backfired when component prices failed to decline as quickly as HP expected during the quarter.

Duboise said that prices on components, such as high-end memory, select optical drives and some processors, are expected to drop, which is partly why Dell is able to make these cuts. But, she added, Dell's build-to-order model gives it room to cut prices with one component and increase it with others. For example, a base system price can drop, but if a buyer adds more memory or picks a higher-end processor, Dell can increase the cost of the overall system and make up for the price cut.

Dell spokeswoman Wendy Giever said the price drops were planned for some time. She declined to say whether the decision to issue a press release was influenced by HP's announcement Tuesday.

But HP spokeswoman Rebecca Robboy was sceptical of Dell's move. "Clearly, it's a PR (public relations) stunt on their part," she said. Giever characterised the cuts as part of Dell's continuous effort to lower prices by reducing its own costs. She noted that Dell cuts prices only when it can afford to do so.

"We don't do it unless we can return value to both our [shareholders] and our customers. Because we are efficient, we can go low," she said. Richard Shim writes for CNET News.com. Ina Fried contributed to this report