HP Cuts Prices, Preps Storage Promotion

The cuts, planned for some time, include a 24 percent reduction on EVA hard drives and the creation of an EVA starter kit bundle, said Mark Gonzalez, Americas vice president for enterprise storage and server sales at HP, Palo Alto, Calif.

Rich Baldwin, president and CEO of Nth Generation Computing, a San Diego-based solution provider, said while the timing looks suspicious given HP's poor storage showing in its recent earnings report, he has seen moves by HP hinting toward this latest round of cuts.

The main reason for the price reductions is to attract customers who might otherwise be put off by high list prices, both Gonzalez and Baldwin said. "In the Intel platform space, servers are typically sold with a low-list-price, low-discount strategy," Gonzalez said. Customers quite often go to a vendor's Web site to compare list prices before placing orders, Baldwin said.

Still, the EVA price cuts may not translate into lower street prices since HP--like other vendors--already heavily discounts its storage price tags, according to channel sources.

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The cuts could eat further into distributor and solution provider profits, including some related marketing funds and other benefits, which at HP are typically based on a percentage of list price.

"HP Unix servers and storage are so commoditized that there is no margin [in selling them]," said Michael Mogavero, executive vice president of Data Systems Worldwide, a solution provider in Woodland Hills, Calif.

To address this, Gonzalez said HP plans a channel promotion to be unveiled imminently that will buoy margins. "So the net result is more sales opportunities while at the same time protecting [partner] margins," he said.