May 18, 2006 2:00 PM PDT
Dell opts for AMD's Opteron
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Rollins said the decision was not related to the antitrust lawsuit AMD filed against Intel last year, in which AMD charged that Intel uses selective pricing schemes designed to provide incentives for its customers to exclude AMD from certain accounts, such as Dell. Intel has denied the charges, and Rollins said he doesn't expect Intel to penalize Dell for adopting AMD.
"Intel has been a great partner, and is going to stay a great partner. They are still going to (provide) the vast majority of our processors," Rollins said.
"We appreciate that Dell shows strong support for the bulk of our product offerings and belief in the strength of our road map," Intel spokesman Scott McLaughlin said in a statement. "The (four-way) niche has been a challenging one, but our next-generation Intel Xeon processor MP (Tulsa), shipping in the second half of 2006, will provide a competitive product."
Four-way, not two-way
It's interesting that Dell chose four-processor servers, rather than two-processor servers, for its first Opteron products, said Gordon Haff, an analyst at Illuminata. "If you're going to introduce an alien product into your line, logically you might do it where your highest volume is."
Although the four-way market only represents about 10 percent of the overall Intel-AMD server market, the servers represent about 30 percent of the overall revenue and are generally fairly profitable machines. AMD has also done particularly well in the segment. The company accounts for more than 40 percent of the Intel-AMD four-way boxes sold, according to various analyst figures.
In the overall Intel-AMD server market, AMD held a 26 percent market share in the first quarter, up from its fourth-quarter server market share of 16.4 percent, according to statistics from Mercury Research.
Several factors have helped AMD in this market, analysts said. The chips consume less power, Martin Kariithi at Technology Business Research said. It's also easier to build four-way servers out of Opteron chips because of their HyperTransport links, said Nathan Brookwood, an analyst at Insight 64.
"They were ready to do this several times," Brookwood said. Dell's recent market share declines, combined with the rise of AMD's market share may have toggled Dell over, he speculated.
Mercury Research analyst Dean McCarron said that a lack of AMD-based systems has hurt Dell in the server business, which, though a fairly small unit market, accounts for a disproportionate share of PC industry profits.
"They've been feeling a lot of competition from Opteron products from the other Tier 1 players," McCarron said, pointing specifically to IBM, HP and Sun.
"Presumably, it got to the point where Dell had to decide what mattered more--loyalty or trying to deal with the competition," he said.
"This is definitely a reality check for Dell," said Charles King, an analyst with Pund-IT. Now that the company has finally gotten on board with AMD, it will be interesting to see how the other server vendors adjust to the loss of an easy way to set themselves apart from Dell in the multiprocessor server market, he said.
While late to the market, McCarron said, Dell could still nab a piece of the Opteron server pie.
"This is a very competitive business," McCarron said. "The fact that they have lost market share doesn't mean that they can't regain it."
Meanwhile, Dell said in a filing with the Securities and Exchange Commission that it plans to sell up to $1 billion short-term unsecured notes, known as commercial paper.
AMD's stock rose 12.6 percent in after-hours trading Thursday, adding $3.95 to reach $35.50. Dell's increased 4 percent, or 95 cents, to $24.90. Intel shares fell 4.8 percent, or 91 cents, to $17.74.
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Kevin Rollins, AMD Opteron, Intel Xeon, multiprocessor, earnings
32 comments
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Let's have a fair market competition, K8L against whatever Intel is cooking!
Nap.
They are not offering AMD becasue they want to but becasue they feel they have no other choice.
I wonder if this "me too" sentiment is going to extend to their AMD line of servers?
This was the right move at the wrong time.
Bottom line, vote with your wallet!
"Our customers expressed a desire for that technology," Rollins said, referring to Opteron.
Mr. Rollins your customers have been screaming for AMD chips for years! The fact that you are only offering the chips in servers and not desktops and laptops only demonstrates that Dell has lost touch with its customers and that you don't really care what you're customers are asking for.
By the way, maybe Mr. Rollins can tell us when Dells business model changed from taking care of customers to taking care of vendors?
One more thing, Dell is only doing this to satisfy Wall Street Analysts that have been lambasting Dell for not offering AMD when they (Dell) are losing market share. The analysts have been changing their recommendations from BUY to just NEUTRAL or HOLD and Dell's stock value started declining.
Dell's planned niche use of Opteron may fool the Wall Street Analysts but it won't fool it's customer base.
As one other poster put it "Too Little, Too Late."
As far as trying to reign in costs Rollins said that they can do that by using higher quality components to reduce warranty costs. This has been a bone of contention with me for quite a while, why were you (Dell) using tier 2 parts to start with? they were saving 10 cents up front only to pay a dollar on the back side. Which also meant the consumer had a defective product for a period of time...NOT GOOD CUSTOMER SERVICE! Customer service is not just answering the phones politely, it's building the best quality, most reliable system you can within the customers budget and not passing off cheap parts.
It's going to take a while for Dell to regain it's crown, if it ever does. Rollins said this is a 4-5 year plan, well if Dell continues on the path it has for the last two years they won't even be around then, it'll be called Lenovo-Dell.
Oh and hell is still quite warm. :)
This is a token and that's all. Dell is still Intel's lapdog.
Don't hold your breath while you're waiting.
Beside that even if Dell does build a desktop with an AMD CPU the rest of the components will be second rate, low bid junk that will probably drag down the extra benefit of having the AMD CPU.
In this case logically not.
a) AMD couldn't supply Dell's 2 way server volume. Why disappoint customers with long waits?
b) AMD systems require far fewer parts. In the case of 4 way servers the advantage is about 4x. Here's where Dell will get the biggest margin boost.
There are other reason's it makes sense too.
server products.
What makes this such a big deal? Their probably getting a better
buying deal from AMD than Intel would ever give them.
So what? Dell's saving money. Big Deal.
server products.
What makes this such a big deal? Their probably getting a better
buying deal from AMD than Intel would ever give them.
So what? Dell's saving money. Big Deal.
THAT is why it's such a big deal.
could be a reaction to Apple's use of Intel chips and is a
differentiator in Dell's high end lineup.
Was Apple's use of Intel exclusive? I don't think so.
<a class="jive-link-external" href="http://db.tidbits.com/getbits.acgi?tbart=08476" target="_newWindow">http://db.tidbits.com/getbits.acgi?tbart=08476</a>
They are not going to use Intel at all in their server line up. I would have bought an Apple in a second if they had used AMD 64 on their consumer and professional products. Instead I have my SUSE Linux 64-bit on my AMD64 laptop.
Opterons are far more profitable to sell than Intel chips. The margins you make buy selling AMD systems is substantially higher than buy selling Intel, and also Opeterons far outperform Intel's.
RTFA, it clearly explains this, and this is very well known and understood.
7-0 AMD
With reguards to Dell now using AMD, it's about time! I'd hate to think how much money and customers they lost in taking so long to make the switch.