IBM ATTACKS SUN ON PRICE WITH MIDRANGE UNIX SERVERS.

(Reuters) - International Business Machines Corp. Has launched a new line of midrange server computers that steps up the price pressures on its archrival, Sun Microsystems Inc..

IBM said servers in its new p670 line, which is targeted at large and medium-sized companies, would cost up to 40 percent less than the equivalent offerings from Sun because they will use fewer computer chips.

"IBM has been getting more astute at Unix and it is launching products at prices that put its competitors in palpitations," said Charles King, an analyst with Sageza, a Silicon Valley-based market research firm.

Sun, which is also expected to launch a midrange server this week, has been fighting IBM on technology and pricing to capture share in the moribund market for servers running the Unix operating system.

Competition has heated up between Sun, IBM and the third major Unix vendor, Hewlett-Packard Co., as recession-wary corporations have frozen technology budgets, and analysts have given mixed signals about Sun's recent performance.

"You're seeing these cheaper midrange boxes because, despite the government's protestations (that the economy is rebounding), there is a reluctance amongst companies to spend too much money," King said.

The server line, which will ship on April 26, includes four computers ranging in price from $178,270 to $535,522, compared with Sun's equivalent range of $257,525 to $792,731 IBM said.

Analysts categorize servers roughly into three groups with high-end computers, costing more than $1 million, midrange computers that cost between $100,000 and $1 million, and low-end computers that cost less than $100,000.