Dell Resumes Price Cuts

The Round Rock, Texas-based computer maker last week offered up sub-$750 dual-core notebooks on its Web site, putting it once again into the ranks of the lowest-cost technology providers and continuing its work at grinding down hardware margins industrywide.

In one of its “limited-time” deals at Dell.com, the company posted a $749 Inspiron E1505 notebook with Intel Core Duo processors. While the notebooks were loaded with Windows XP Media Center Edition, an upgrade to Windows XP Pro only brought the system price to a still-lowball $898.

Late last year, Dell executives––who saw their company disappoint Wall Street in at least two consecutive quarters—had indicated they would move away from bloody pricing cuts in some segments including printers. Last month, however, Dell Senior Vice President Joseph Marengi told investors at a conference in Arizona that the company’s priority was still in selling systems—even if it meant occasional aggressive pricing.

“It’s always been difficult to compete with the tier-one manufacturers when it comes to price, and the whitebook options we’ve had available to us to date haven’t really allowed us to build products which we can differentiate from the big guys’ offerings,” said Todd Swank, marketing director at Nor-Tech, a Burnsville, Minn.-based system builder. Swank said his company recently began offering low-priced systems from ASUS and Acer, which are selling, but sales of systems Nor-Tech builds itself “have remained flat at best.”

However, Swank is hopeful that the new “Verified by Intel” program—which provides benefits for system builders who use lower-cost, standard components in whitebooks—would level the playing field.

“It might finally allow us to offer solutions that will help us leverage our strengths, which have made us successful in selling workstations and servers,” he said. “Once we have a large variety of interchangeable components to choose from, perhaps we can start developing truly innovative mobile solutions rather than build notebooks based on technology that the tier-one guys have already been selling for six months to a year.”

Intel executives, though, have said they believe the “Verified” program would allow system builders to provide whitebooks in the $1,500 range—hundreds more than comparable Dell systems.

“The impact from Dell has been there,” said David Chang, CEO of Agama Systems, a Houston-based system builder. “In notebooks, there used to be some money. Not now.”

Chang said he believes in many cases margins have actually hit rock bottom.

“It’s not going to get any worse,” he said. “It can only go higher.”