Intel and the DELL-AMD Deal
Intel takes a hit as Dell opts to use AMD’s ‘Opteron’ in multiprocessor servers, ending its Intel-only strategy.On May 20, 2006, US-based Dell Computers (Dell), the world’s largest PC manufacturer, announced its plans to enter into a deal with Advanced Micro Devices (AMD)1 under which it would use AMD’s Opteron2 microprocessors in the server segment. The announcement left analysts surprised as Dell had always used microprocessors from Intel Corporation (Intel).
Commenting on Dell’s announcement, AMD’s Senior Vice President, Marty Seyer, said, “We welcome Dell, and Dell customers, to the world of AMD64.” He added, “Dell is a customer-focused company and we’re pleased to see that they are listening to their customers and providing them the choice of innovative AMD products.” 3 Dell president and CEO Kevin Rollins pointed to AMD’s technology lead on Intel in the 64-bit 4 category as the primary reason for the shift in Dell’s Intel-only strategy. He said, “They’ve (AMD) been getting better and better. The technology is better. In some areas they’re now in the lead on Intel. That is what is interesting us more than anything.” 5
Dell preferred to use AMD’s Opteron processor in the server segment as the processor had been doing extremely well in this segment. As of May 2006, AMD had an estimated 45% share in the four-way server6 segment in the US, which was considered to be the most profitable segment for computer manufacturers.
Not surprisingly, Intel was unhappy with Dell’s decision to opt for AMD as Dell had been using Intel chips for its servers, laptops, and desktop PCs since it started selling PCs in 1985. Otellini, Intel’s CEO, said, “While this is an incredibly disappointing announcement, it is not totally surprising. We exist inside of an extremely competitive industry and we have always had to work hard to win every piece of business.”7
[1] Established in 1969, AMD is a leading provider of innovative microprocessor solutions. As on March 31, 2006, the company reported revenues of US$ 1.33 billion.
[2] Released in April 2003, Opteron is the first of AMD's processors intended to compete in the server market.
[3] Jay Lyman, “Dell to Offer AMD Opteron-Powered Servers,” www.technewsworld.com, May 19, 2006.
[4] AMD64 (also x86-64 or x64) is a 64-bit microprocessor architecture and corresponding instruction set designed by Advanced Micro Devices. It is currently implemented in AMD's Opteron and other processors like Athlon, Turion, and Sempron.
[5] Susan B.Shor, “Dell warns Intel with talk of AMD inside,” www.technewsworld.com, Dec 11, 2004.
[6] A four-way server provides fast performance and scalability by supporting multiple CPUs. In this case it would support four processors. The computer architecture used in four way servers is called SMP (Symmetric Multiprocessing).
[7] Scott M. Fulton, III, “Intel CEO Otellini ‘incredibly disappointed’ by Dell’s AMD decision Scott M. Fulton, III,” www.TGDaily.com, May 19, 2006.
