Compaq will provide PCs, servers, storage devices and services for Seattle-based Starbucks' corporate network under a five-year contract. Compaq also said it will create a high-speed wireless network in some Starbucks stores so users of handheld computers, such as Compaq's iPaq Pocket PC and rival wireless devices, can link to the Internet.
In recent weeks Dell has lowered prices to take customers away from rivals, including Compaq and Gateway Inc. Yesterday, Dell dropped the price of its new Dimension 8100 PC by 20 percent, a week after it was introduced. Compaq said last week it would lower prices to make its products more competitive.
The Starbucks contract shows a new attitude at Compaq, which hasn't been known for competing aggressively on price with Dell, said David Zale, an analyst with Sands Brothers & Co.
"This could be reaffirmation that it's great time to buy a computer," said Zale.
David Frink, a spokesman for Austin, Texas-based Dell, said the company decided to pull out of the bidding.
"They asked for pricing that was not in the best interests of Dell and its shareholders," Frink said. "You cannot give it away for free."
'Sour milk'
It's difficult to tell whether Compaq was selling to Starbucks at a loss, Zale said. Dell's reaction, though, "sounds like sour milk," he said.
"For a company the size of Dell, it's not material, but US$100 million is still US$100 million," he said.
Dell shares have climbed 48 percent this year, making Dell the seventh-best performer in the Nasdaq 100. The shares fell US$0.48 to US$25.76 in regular trading today. Compaq shares fell US$0.10 to US$17.60, and are up 17 percent this year.
Last week, prices for consumer desktops fell about 3 percent and business desktop prices declined 1 percent, Kimberly Alexy, an analyst for Prudential Securities, said in a report. She said she expects prices to continue to fall.
Compaq is developing a business of supplying and servicing computer systems for large corporations and reducing its focus on the less-profitable PC business. Compaq and Intuit Inc, the top maker of personal-finance software, signed an agreement in March that is similar to the one with Starbucks, the No. 1 US specialty-coffee chain.
The new Compaq network will be available by mid-year in 500 Starbucks stores in Seattle, Dallas, New York City and California, Compaq said. Starbucks will charge a fee for customers to use the service, Compaq said. More details will be provided when the service is launched.
Starbucks and Microsoft Corp agreed in January to develop high-speed Internet connections in Starbucks locations jointly, using MobileStar Network Corp's wireless network. Compaq will provide access devices such as iPAQ Pocket PCs for customers to use while in the stores.
Play video
There are currently no comments for this post.