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Dell Plans to Reduce Computer, Server Prices

Retail: Shares fell to the lowest point since 1998. But analysts say the PC maker will naturally lose some ground on Wall Street.

September 28, 2000|From Associated Press

AUSTIN, Texas — Dell Computer Corp. said Wednesday that it plans to slash prices on some computer servers and PCs, passing on savings to consumers as parts become less expensive.

But investors hardly celebrated Dell's announcement. On a day many tech stocks were down, Dell shares fell to a 52-week low midday on the Nasdaq Stock Market. The stock recovered somewhat to end regular trading at $32.44, down $1.19, or 3.6%.

Round Rock, Texas-based Dell said it was reducing prices on its PowerEdge servers 14% to 47%. The servers, or computers used to host Web sites, now will sell for as low as $1,199.

It's typical for manufacturers to lower prices on existing products as new ones are about to emerge and as an attempt to leap over competitors, said Barry Jaruzelski, management consultant with Booz Allen & Hamilton in New York.

Also on Wednesday, the company cut prices 15% on Dimension desktop personal computers and 12% on Inspiron notebooks for small businesses. The computers now begin at $599 and $1,099, respectively. The prices are good through Oct. 25.

"As Dell takes delivery of lower-priced components, we can immediately pass those savings on to our customers," said Frank Muehleman, vice president and generalmanager of Dell home and small-business group.

Jaruzelski said the price cuts are an example of the success of Dell's direct model, which allows the company to build units as they are ordered.

Meanwhile, Dell's stock continued to fall from a high of $53.94 in June and to its lowest point since 1998.

Analysts say the nation's No. 1 personal computer maker will naturally lose some ground on Wall Street as competition increases and as the company's phenomenal growth slows.

"It's not humanly possible for them to continue at those rates," Jaruzelski said. "It was probably ridiculous for people to continue to expect that."

Because of the falling computer-parts prices and sustained sales, Dell is expected to meet yearly expectations of 30% growth over last fiscal year, when the company earned $25.2 billion. Shares hit a 52-week high of $54.31 that year. The company's fiscal year ends in January.

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