May 18, 2006 2:00 PM PDT

Dell opts for AMD's Opteron

Dell has agreed to use Advanced Micro Devices' Opteron chip in multiprocessor servers by the end of the year, ending a long-standing policy of sticking exclusively with Intel.

The PC maker made the move public in its first-quarter earnings press release on Thursday. Speculation has mounted for years as to whether Dell would adopt the company's chips, despite Dell's exclusive relationship with rival Intel to this point. AMD has enjoyed a performance lead in server benchmarks over Intel's Xeon processors.

"We welcome Dell, and Dell customers, to the world of AMD64," Marty Seyer, an AMD senior vice president for commercial business, said in a statement distributed after Dell's earnings release.

Although the deal is confined to servers at this point--and it's not clear exactly when the servers will arrive, other than before the end of the year--it still represents another win for AMD, which has had a long string of gains over its rival. Intel's earnings and stock price have suffered in recent quarters, due in part to AMD's increasing market share.

Dell's decision to abandon its longstanding all-Intel policy comes amid less-than-stellar earnings for its first quarter. The results were in line with the warning the company provided last week. Revenue was $14.2 billion, up 6 percent from last year, but net income slid 18 percent to $762 million. Dell said it's no longer giving specific quarterly financial guidance, though it did say the second quarter should be similar to the first.

Earlier this week, company founder Michael Dell admitted the PC seller's performance over the last year had been disappointing. "I think there are lots of opportunities for us to do quite a bit better than we did last year," he said at the Future in Review conference Monday. "We didn't recognize how competitive the market was going to be." In hopes of getting back on the right track, Dell will accelerate plans for $3 billion in cost cuts and will spend $100 million on improving its customer service, CEO Kevin Rollins said Thursday.

The cost cuts will come from improving the efficiency of its support and manufacturing processes, Rollins said on a conference call following the earnings announcement. "We'll have the flexibility to price more effectively," he said, adding there are no plans for job cuts.

First embrace
Rollins said Dell's initial embrace of AMD will only involve servers with four processors--a relatively small category of the server market. There are no plans to sell AMD's chips in desktop PCs, notebooks or other servers at this time, he said.

"Our customers expressed a desire for that technology," Rollins said, referring to Opteron. "We will still be launching this year a broad base of Intel products."

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In an interview later on Thursday, AMD's Seyer said that the company has been demonstrating its technology to Dell for years.

"I've replaced a third set of tires on my car going back and forth" over the past four years, he said.

Several times during the last few years, Rollins has hinted that the company was right around the corner from introducing products based on AMD's chips. Ever since AMD introduced Opteron in 2003, the processor has enjoyed an advantage over Intel's Xeon. During an extended period in 2005, server vendors Hewlett-Packard, Sun Microsystems and IBM were shipping dual-core versions of the Opteron processor, and Dell could offer only single-core Xeon processors.

AMD's progress on the Dell account, though, was steady. When AMD took over 10 percent of the market for Intel-AMD chips in early 2005, it was a pivotal point for establishing AMD's credibility among business buyers. Some government customers also began to specify that they wanted "Opteron or equivalent" servers in the bid proposals, Seyer said.

"In the second half of 2005, Dell's customers began to speak quite loudly about Opteron," he said.

Sources close to AMD, however, said a deal between Dell and AMD wasn't signed until this year.

CONTINUED: Intel still a great partner…
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WELL... What to say about it, except that it was long overdue! Good, finally some meaning out of it.

Let's have a fair market competition, K8L against whatever Intel is cooking!

Posted by nap1805 (12 comments )
Reply Link Flag
The right move at the wrong time.
They were too good for AMD while they were on their way up and living the good life, now at the first sign of trouble and as people are starting to lose interest they embrace it.

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.
Posted by Dachi (797 comments )
Reply Link Flag
A ltitle late
A year ago I was shopping for a new server for my company, & I had wanted one with an AMD Opteron. Although Dell was trying to be competitive pricewise, their lack of any AMD Opteron servers left me with the decision to shop elsewhere. I suppose I can check them out again next time I need to shop for a server.

Bottom line, vote with your wallet!
Posted by M A (51 comments )
Reply Link Flag
amd should suddenly get 'constrained' on dell orders...
at least at the start, a nice gift for their buddies over at HP who actually sell their products without their arms twisted behind their backs...
Posted by Yukimi Konomi (48 comments )
Reply Link Flag
Too Little... Too Late
The fact that it has taken Dell this long to offer AMD chips in its systems is absolutely gross neglegence on their part.

"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?
Posted by alqaqish (127 comments )
Reply Link Flag
Agree 100%, but what's more...
You couldn't have stated it better.
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.
Posted by fred dunn (793 comments )
Link Flag
Dell is about to get better
I can't wait for the number one producer of PC's on the planet to start offering REAL gaming machines, with AMDx2 processors...and for those of you who said hades would freeze over before this ever happened: check your's suddenly getting cooler...
Posted by IndioITMan (13 comments )
Reply Link Flag
What gives you that idea?
I still see no indication of AMD desktops from Dell or Apple.
Posted by Jackson Cracker (272 comments )
Link Flag
Not any time soon.
If you can't wait, you're in a lot of trouble. Dell is only offering an "oh yeah, we have some amd stuff" attitude. You want AMD from Dell? Well just go and buy a 4 way Opteron server. They still don't seem to get it, where their desktops and gaming systems are concerned.

Oh and hell is still quite warm. :)
Posted by J_Satch (571 comments )
Link Flag
Have I got a bridge to sell you....
This is simply to satisfy the Wall Street Analysts that have been downgrading Dell's stock because they are losing market share to companies that have AMD offerings.
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.
Posted by fred dunn (793 comments )
Link Flag
Check yo'self!
Dell DOES offer real gaming machines with AMD processors...through Alienware. Dell bought the company back in March.
Posted by bob blob (118 comments )
Link Flag
Illuminata is pretty dim
>>>...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."<<<

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.
Posted by scdecade (329 comments )
Reply Link Flag
don't forget risk
Not to mention the risk... placing an "alien" part in a high-volume sales area presents risk to an already successful product line.
Posted by David Arbogast (1709 comments )
Link Flag
So what.
Dell has already been using there chips already in some of its
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.
Posted by ServedUp (413 comments )
Reply Link Flag
you are forgetting that Dell will take business from HP unlike what most of these AMD enthusiasts think. How long would AMD keep that MP Dell business for? We will find out by the end of this year, or may be sooner!
Posted by ilover2 (17 comments )
Link Flag
So what?
Dell has already been using there chips already in some of its
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.
Posted by ServedUp (413 comments )
Reply Link Flag
What are you talking about?
Dell has not been using AMD chips in any of it's servers, or desktops or laptops for that matter.

THAT is why it's such a big deal.
Posted by cameronjpu (178 comments )
Link Flag
Posted by bemenaker (438 comments )
Link Flag
A monopoly is born
Great business desision computers are a commodity now anyway. The cheaper the better. This makes it much easier to decide for the average Joe which computer to buy.
Posted by Reader11 (10 comments )
Reply Link Flag
Not great committment
They arent using AMD on desktops, laptops...and gona use it only the quad processor servers....not really delighted...though its a beginning. The did understand the competition was what we heard from Michael and Kevin...with this move they have understood only partially.
Posted by amdamdamd (1 comment )
Reply Link Flag
Response to Apple's use of Intel?
Part of their consideration of the use of AMD I suspect it that this
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.
Posted by technewsjunkie (1265 comments )
Reply Link Flag
Response to Apple?
Actually, I read recently, that Apple has opted to put AMD Operton dual core chips in all of their future X86 based XSERV servers.

<a class="jive-link-external" href="" target="_newWindow"></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.
Posted by jcannonb (7 comments )
Link Flag
HA! Get real
Apple's sales are a drop in the bucket compared to Dell. Irrelevant.

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.
Posted by bemenaker (438 comments )
Link Flag
Cnet's own AMD vs. Intel tests
<a class="jive-link-external" href="" target="_newWindow"></a>

7-0 AMD
Posted by emehrkay (13 comments )
Reply Link Flag
The tied is about to turn
The 7-0 will be Intel's soon.. Have you been following the news?
Posted by ilover2 (17 comments )
Link Flag
Amd and Intel will eventually switch places!
Though a fan of Intel(hence my screen name), it is painfully obvious that when trying to compete with AMD they have failed miserably. They think because they can push more product out than AMD that they will stay in a dominant position. They came up with this strategy? some time ago and low and behold today we see the results, AMD because of a superior product line is spanking Intel. AMD has actually been outselling Intel for the past few months and that doesn't look to change anytime soon. Intel had a chance to squash AMD by building a superior product but instead decided to rest on its laurels. In their arrogance, Intel has not only lost market share but reputation as well. If you are looking for the fastest pc these days, you're not looking at Intel, you're looking at AMD. This, I'm afraid, is where the paths of the two companies will cross but in opposite directions. Intel will eventually lose its leadership role to AMD, and Intel will be the one trying to play catch up. The moral of this story is "you reap what you sow"!
Posted by DAVIDINTEL (4 comments )
Reply Link Flag
My other posting under wrong talkback story
but hopefully is still interesting.

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.
Posted by DAVIDINTEL (4 comments )
Reply Link Flag

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