Intel and the DELL-AMD Deal
Intel had been the market leader in microprocessors since 1991 despite fierce competition from Samsung, Toshiba, and Texas Instruments in the semiconductor industry. However, Intel now faced competition from AMD and small competitors like VIA and Transmeta, which manufactured low power processors for computers and portable equipment. Intel had also been facing problems on the earnings front. For the first quarter of 2006, it reported earnings of US$ 5854 million, as against the US$ 6,211 million recorded in the first quarter of 2005.Experts were of the opinion that Intel had taken its market leader position for granted and had failed to come up with innovative products such as AMD’s Opteron, considered to be a leading technology in the industry. Analysts said that the reason for Dell’s shift to AMD was a result of Intel’s loss of focus on technological development. To add to Intel’s woes, Microsoft announced that its new operating system (OS) Vista 8, to be launched by 2007, would not need any hardware upgrade. Intel had expected that the new OS would boost the demand of its computer chips. In early 2006, Intel decided to go in for a rebranding strategy and changed its brand name and logo.
The rebranding strategy was taken as Intel planned to position itself as a consumer-oriented, digital media platform provider rather than merely a supplier of CPUs and components for other manufacturers. Analysts explained that Intel’s move was intended to strengthen its presence in new businesses areas such as cellular phones, MP3 players, remote controls, and PDAs as it was facing intense competition from arch-rival AMD, which had resulted in its losing market share. Intel considered Dell’s move to AMD Opteron as a wake-up call to it to increase its competitiveness.
Otellini said, “Inside Intel we need to keep a clear focus on delivering the new family of products this year and next that will allow us to win back share in all market segments and at all of our current and future customers.”9 But some analysts opined that Dell had chosen the wrong time to shift from Intel as Intel had plans to launch a next-generation processor ‘Woodcrest’ for the servers segment. Intel claimed that the new processor would give tough competition to AMD’s Opteron.
ADDITIONAL READING AND REFERENCES
1. “Dell Goes For AMD,” www.forbes.com, May 18, 2006.2. “Dell-AMD Deal Dominates Tech News,” www.forbes.com, May 18, 2006.
3. Edward F. Moltzen and Kristen Kenedy, “Dell To Use AMD In New Servers,” www.crn.com, May 18, 2006.
4. Ben Ames, “Dell plans AMD servers,” www.infoworld.com, May 18, 2006.
5. Scott M. Fulton, III, “Intel CEO Otellini ‘incredibly disappointed’ by Dell’s AMD decision,” www.TGDaily.com, May 19, 2006.
6. Jay Lyman, “Dell to Offer AMD Opteron-Powered Servers,” www.technewsworld.com, May 19, 2006.
7. “Dell switch dents Intel shares,” www.news.zdnet.com, May 19, 2006.
8. Swapnil Bhartiya, “Dell Drops Intel, Picks AMD,” www.EFYTimes.com, May 20, 2006.
9. Matthew Borghese, “Intel's CEO Speaks Out About Dell's Move To AMD,” www.allheadlinesnews.com, May 20, 2006.
[8] Microsoft Windows Vista is the next generation of Microsoft Windows after Windows XP. It proposed to integrate security as not an add-on feature but an integral part of an operating system. It is scheduled to be launched in January 2007.
[9] Scott M. Fulton, “Intel CEO Otellini ‘incredibly disappointed’ by Dell’s AMD decision,” www.TGDaily.com, May 19, 2006.
