Sysorex fires first salvo in potential price war

Sysorex Information Systems Inc. last month priced its entry-level PC system offered on an Army contract at about half what competitors are charging for similar equipment on other governmentwide contracts. Analysts said this figure would set a new price floor for PCs in the federal market.

On the Army's PC-2 contract awarded to Sysorex and BTG Inc. last year Sysorex is asking $1 118 for an entry-level configuration of a 150 MHz PC that comes with 16M of memory a 2.1G hard drive a 17-inch monitor a CD-ROM drive and video and sound cards. The computer is based on IBM Corp.'s 6x86 150 MHz microprocessor.

According to industry sourc-es Sysorex is buying the microprocessor from IBM at a significant discount and then configuring the system around that chip. The chips were designed by Cyrix Corp. a competitor of Intel Corp. and were manufactured by IBM Microelectronics.

Similar PCs which may vary slightly but are comparable offered by other federal information technology contractors are priced up to $1 000 more. No vendor or agency contract manager said they plan to meet Sysorex's price. While Syso-rex's rock-bottom price may be ominous for other vendors federal agencies which buy 500 000 to 600 000 desktop PCs a year could pocket huge savings from the low pricing.

According to a yet-to-be-released internal Army survey Sysorex offers the lowest prices on advanced technology. "If you try to buy a 17-inch monitor retail it will cost you close to $500 " said Thomas Michelli director of the Army Information Systems Management Activity.

The aggressive pricing took many of Sysorex's competitors by surprise and left many questioning whether Sysorex could deliver. One industry source called it "an astounding price.... Do they have a death wish over at Sysorex?"

Deborah Gordon president of GCG Computers Inc. Columbia Md. a prime contractor on the National Institutes of Health's Electronic Computer Store governmentwide contract said: "This always happens: Someone comes out with a low price and they think they will corner the market but it turns out that they underbid it and they can't keep up with the volume and they [fail]."

Ali Nadir vice president for programs at Sysorex said that despite the system's low price the company "will make money on this contract."

Bob Dornan senior vice president of Federal Sources Inc. called the Sysorex pricing "incredible." Vendors however insist that agencies look for service as well as low price. Pete Carrier deputy program manager with Hughes Data Systems on the Air Force's Desktop V contract said beyond the basic purchase price users should take into account post-sales support and technology refreshment.

Nevertheless Carrier said Hughes is "looking at significant price reductions of the products we have on the [Desktop V] contract."

However some vendors will resist at least for a while entering into any price war. "From our view we think best value is the most important thing " said Jim Connal managing director of federal sales at Gateway 2000 Inc. Gateway would respond to market pressures Connal added but "we don't see the signs of a pricing war.

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