Original URL: http://www.theregister.co.uk/2009/08/11/nec_us_financing/

NEC punts 0% financing, deferred payments

Americans get cheaper iron loans

By Timothy Prickett Morgan

Posted in Servers, 11th August 2009 19:13 GMT

Following in the footsteps of the indigenous server makers in the United States, Japanese box peddler NEC has launched zero per cent financing and deferred payment offers for buyers in North America willing to do a deal now, rather than waiting until the economy improves.

By offering low-cost or deferred payment financing, server makers can keep the revenue they book for servers and related storage higher than it would be if they had to discount to move products, which makes the server units of their businesses look stronger.

The financing also shifts some of the cost of making the sale from the server business units over to the financing units, bolsters the amount of assets under financing and, over the long haul, increases the monthly revenue stream for the financing unit. It is a win-win-win for the customer, the server unit and the finance unit over the long term.

Rebates and trade-in credits have the similar effect of keeping reported revenues high, but they impact the profitability of server and storage businesses because the rebate hit stays in those system businesses. Trade-in credits (good toward the purchase of other goods and services) and rebates are popular lubricants to grease sales in IBM's system biz. Dell and Hewlett-Packard also like to give instant rebates for customers who buy through their online stores.

Bigger customers buying lots of iron or expensive boxes get tailored deals, of course. So such financing deals as NEC is promoting do not really affect them in the same way that it affects small businesses and midrange shops.

Customers acquiring servers and storage from NEC have two different financing options. The first is a 36-month lease with a zero per cent financing rate, that has a fair market value purchase option at the end of the lease. (Some leases have a $1 buyout option, but this one takes a stab at predicting the fair market value three years hence and writes a lease covering the remaining portion of the box.)

Alternatively, customers can do a normal 36-month lease, with no money down, for the full amount of the equipment being financed, with whatever financing rate they are due based on their company's credit. They can also defer payments for 120 days. The deferred payments do not come free, by the way. Those four months of free usage of the gear are tacked on as four extra payments on the end of the lease, so you pay out 40 months worth of payments.

The financing is being offered through NEC Financing Services, the leasing and financing arm of NEC that also provides financing to system integrators and resellers, as well as to end user customers.

A tough slog

Under the zero per cent financing or 120-day deferred payment deals, customers in the US can finance NEC's SigmaBlade blade servers, its Express5800/100 rack servers, Express5800/300 fault tolerant servers, and Express5800/A1160 high-end servers (all x64 boxes); the financing can also be used on its D-Series SAN storage arrays and its Hydrastor backup and archive grid storage. The financing is not available on NEC's Express5800/1320Xf and Express5800/1080Rf Itanium-based servers. Both financing options expire on December 31.

By the way, NEC Corporation of America might be based in Irving, Texas, but this part of the Japanese giant actually covers the US and Canada. As such, customers buying NEC servers and storage in Canada should ask for the same generous financing that the U.S. customers to the south are getting.

In recent years, NEC has been ramping up its presence in the American server market, both directly and through its partnerships with Stratus Technologies for fault-tolerant servers and with Unisys for high-end enterprise servers. The company announced in January that it was cutting 20,000 jobs to stop the haemorrhaging of red ink at the company, and shuttered its European PC business and outsourced its European server business shortly thereafter. In May, NEC pulled out of the high-profile $1.2bn Project Keisoku, a government-backed Japanese supercomputer that was to have Fujitsu do Sparc scalar processors and NEC and Hitachi collaborate on vector processors for a hybrid parallel super that scaled to the tens of petaflops. In July, Fujitsu took over the entire Keisoku effort and will build a machine just using Sparc64 processors.

Getting a bigger piece of the North American server and storage pie is one of the things that NEC desperately wants as it seeks to boost its top and bottom line. But business is tough here in the States, and the indigenous vendors and their resellers are keen on protecting their turf. To put it bluntly, IBM and HP are bigger banks than NEC is, are in better financial shape, and have the lion's share of customers here in North America.

This will be a tough slog at best for NEC. But customers will win just from the increased competition, and the NEC machines can hold their own against whatever IBM, HP, Dell, Sun Microsystems, and Fujitsu can put into the field. ®