IBM server breaks $1,000 price barrier

ITworld.com –

Combatting computer makers are shifting the battle from the consumer PC market to servers for small businesses, as IBM announced Thursday that it had released a server priced under $1,000 for small and medium-sized companies.

IBM priced its eServer x200 at $970. At starting pricing it uses an Intel Corp. Celeron 667Mhz microprocessor but can be equipped with a Pentium III. The x200 comes with IBM's Netfinity Director, which allows customers to remotely manage and deploy server configurations for mission-critical applications. It also comes with hard disk predictive failure analysis.

"Small businesses have been relegated to buying 'white box' servers," said Jim Gargan, IBM's director of strategy and product marketing for eServer, referring to computers built and sold at commodity cost by little-known companies. "The point of the announcement we're making is that customers don't have to purchase white boxes -- they can have big business brand support. They get the same level of support as the big businesses."

The server is designed for rack mounting and has IDE (Integrated Development Environment) support integrated for tape drive and RAID (Redundant Arrays of Independent Disks) cards. It has five PCI (Peripheral Component Interconnect) slots (5X32-bit), up to seven bays and integrated 10/100 Ethernet capability.

The x200 comes with 64 of ECC SDRAM (Error Checking and Correcting Synchronous Dynamic Random Access Memory) and can be expanded to 1.5G-bytes. A 15G-byte hard drive is standard, and it can expand to carry 145.6G-bytes of internal storage capacity.

IBM also introduced a low-priced two-processor server for workgroups or branch offices. The x220, priced at $1,405 on their Web site, comes with a single Pentium III 800Mhz processor but can be equipped with up to two 933Mhz Pentium III processors. The stock model has 128M-bytes of ECC SDRAM and can expand to 4G-bytes of ECC SDRAM.

However, it lacks a hard drive. While expandable to 145.6 G-bytes of storage, a 9.1G-byte hard drive -- the smallest available -- will add $214.

IBM claims the eServer x220 is "the lowest priced two-way server in the industry offering high-availability," according to their release. "Typically the hardware performs at consistently above a 95-percent uptime," Gargan said, touting reliability features like the error-checking memory, hot-swap SCSI (Small Computer Systems Interface) hard files and improved system management capabilities -- including an optional $499 remote supervisor card.

Dell Computer Corp. introduced a two-way server in October starting at $1,039 -- about $360 less expensive than the IBM offering. Dell's PowerEdge 300 comes equipped with one or two 800-MHz Pentium III processors. It supports up to 1G-byte of memory and runs the latest Windows, NetWare and Linux operating systems. It also includes three bays with up to 60G-bytes of internal drive capacity.

Gargan called it low-tech.

"They took technologies that have been around since 1996, and they positioned it as a low-price point," said Gargan. "What we've tried to do here is deliver the latest technology at a price point small businesses can afford."

Dell disputes both the claim that x200 is "the first Intel-based server to break the $1,000 barrier," as the IBM release said, and that the x220 is the lowest-priced two-way server with high-availability.

The sticking point is the term high-availability, said Mike Roberts, a Dell product marketing manager. "High availability is in the eye of the beholder," he said. "They're not telling you what you have to do to get the high-availability features." To get the hot-swap functionality for hard drives which allows a manager to replace hard drives without shutting down the server, a RAID card is required -- which costs around $700, he said in example.

Analysts also have qualms with IBM's claim of high-availability for the x220.

"It would fall short of our definition of high-availability," said John Enck, research director for high-tech market analysis company Gartner Group Inc. "It's all 'insurance technology,' it does not create what I would call a high-availability environment."

Dell's PowerEdge 300 server also has reliability features like ECC memory, but Roberts makes no claims of high-availability. It does not integrate support for IDE, nor does it come standard with an Ethernet card. It requires a SCSI adapter card and isn't rackable. He said that Dell's price for online purchase dropped below $1,000 shortly after the server's release and before IBM's release, however.

Roberts said a better comparison for the x220 would be the Dell PowerEdge 2400, which comes with more high-availability features than the 300, and is lower priced than an IBM x220 would be after adding a hard-drive, RAID card and hot-plug functionality.

Commoditization is forcing computer makers to have the best prices for entry-level servers, Enck said. "There's a lot of competition in this low-end market. There really is no clear market leader." Gartner research figures released Thursday indicate Compaq Computer had 27.3 percent of the overall worldwide server market in the third quarter of 2000, but Enck distinguished that lead from a lead among lower priced models.

Dell ultimately benefits from aggressive price competition in the server market, said Bruce Anderson, a Dell spokesman. "There's never been a computer market that could sustain a high margin," he said. "Our direct model is one of our competitive weapons. We hope to commoditize the market, to the customer's benefit, and our own."

The worldwide server market is growing, with 16.9 percent more servers shipped in the third quarter of 2000 than the same period last year, according to Gartner. IBM's market share slipped to 16.4 percent from 18.6 percent in the same period last year, even as the number of units shipped grew by 2.6 percent. Dell, on the other hand, grew to a 14.9 percent share, compared with 12.3 percent the previous year, increasing its number of servers shipped by 41.1 percent.

Compaq's shipments increased by 20 percent year-over-year for the third quarter. While Compaq lacks a sub-$1,000 server now, its lower-priced servers compare equitably to the fully configured Dell and IBM lower-priced models. Enck said Compaq will push hard into the low-end server space with a new product offering due for public release on Nov. 15.

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