IBM has declined to cut or match prices on more expensive Unix servers that are powered by the company's POWER4 chips and run the Unix operating system, said Karl Freund, a vice president of product marketing for IBM's server business.
The shares of IBM fell US$0.71 to US$80.01 at 4pm in composite trading on the New York Stock Exchange yesterday. They have dropped 34 percent this year. Dell shares fell US$1.12 to $29.82 on the NASDAQ Stock Market.
IBM's Intel server revenue increased 29 percent in the third quarter to US$306.7 million, according to Gartner Inc's Dataquest research unit. IBM's sales rank third in the market, behind Dell and Hewlett-Packard Co, according to Dataquest. Armonk, New York-based IBM, which ranks first in sales of all servers, declined to give the dollar amount of its server sales.
Sales in IBM's hardware business, which includes computers, chips and components, dropped 11 percent to US$33.4 billion last year. It is IBM's second-biggest division, after services.
Dell is "pretty confident" in its market position, Dell spokesman Bruce Anderson said.
Other rivals like Hewlett-Packard and Gateway Inc have unsuccessfully tried to beat Dell on price, though investors say IBM is better insulated in its new willingness to discount.
The pricing competition "impacts Dell more because they don't have those other businesses," Victory Capital's Shagrin said. "Dell should be worried about IBM. The question is how long IBM wants to or will be able to sustain such aggressive pricing."
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