Compaq to offer low-cost server

Compaq's decision to launch a sub-#1,000 server to grow its market share in the small and medium-sized business sector will cost it PC sales.

The budget server is intended to attract companies which have previously bought PCs to work as servers because they couldn't afford one of the major brands.

Hugh Jenkins, Compaq's enterprise group product manager, said: 'This takes us aggressively into an area where people wouldn't have thought they'd see Compaq. It's going to be the VW of the server market.'

He conceded the move would most likely mean some lost sales of powerful PC system units, but defended the strategy because of what it would mean to Compaq's server business.

In the low-end server market, Compaq claims its main competition comes from very small computer operations, not its major-name rivals.

'Dell do not have a product in this category and IBM's product is nearly twice as expensive as ours. The biggest competitor to us is people building their own,' said Jenkins. 'We've got 40% of the market and if we did nothing at this end of the product range we'd move down to 30%.'

The new server, the ProSignia 200, is built around a 166MHz Pentium processor. The basic model costs u995 and comes with 16Mb of EDO memory and five expansion slots - two PCI, two ISA and one shared PCI/ISA slot.