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Server, PC and ink maker Hewlett-Packard gets a lot of business from small and medium businesses, and these companies are struggling a bit in the Western economies right now. So HP's Financial Services arm has rolled out a tried and true - but dangerously addictive - tactic to move gear: zero per cent financing.

HP Financing Services this week announced two different zero deals for SMBs. The first offers customers a means of getting new gear under a twelve month lease with zero per cent interest with a $1 payout at the end of the lease. In essence, HP is letting customers have the gear they want today and giving them a year to pay it off without charging them for the use of the gear or the money.

This deal is available only to corporations (not government or educational institutions) and is only being announced in the United States and Canada, as far as we know.

In the United States, this twelve-month financing can be used for deals ranging in price between $1,500 and $150,000 (that's in greenbacks), and in Canada, transactions have to range from $5,000 to $150,000 (that's in looneys). The deal is available for ProLiant tower, rack, and blade servers, which use x64 processors, and for Integrity BL860 and BL870 blade serves, entry Integrity 2600 and 3600 servers, and midrange Integrity 6600 servers, which use Itanium chips.

HP's MSA and EVA disk arrays and related storage servers and nearline tape systems can also be financed, as can ProCurve switches, PCs and laptops, printers and scanners, ink, paper, toner cartridges, and support contracts for the gear.

On the PC and laptop front, only so-called Smart Buy preconfigured machines are eligible for the financing, and if you read the fine print, some of the ProLiant servers and storage gear is not available in Canada. Which is stupid, and if you are a Canuck, you should demand exactly the same products as the Yankees are getting.

And for that matter, if you are an SMB shop in Europe, HP should be cutting loose the finance charges for its leases, too, if it wants you to spend precious cash in this crap economy.

If SMBs want to spread the costs of the acquisition over a longer term, HP Financial Services also this week announced a 36-month zero per cent financing deal. This deal has all the same restrictions as the twelve-month deal above, but instead of a $1 payout at the end of lease, you pay the fair market value of the equipment at end of lease, as assessed by HP. Also, the restrictions on certain ProLiant and StorageWorks products that was placed on Canadian buyers is not in this deal.

Both financing deals expire on April 30, which is the end of HP's fiscal second quarter. The executives at HP Financial Services are probably not keen on seeing their revenue stream impacted by such a deal, but with credit so tight and companies really wary of spending, the company has to do something to grease the wheels of commerce.

The problem with zero per cent financing is that both the vendor and the customer get used to it, and then customers start expecting it and then demanding it. This puts pressure on vendor profits in its financing arm, even if it does help out the product lines. ®

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