The Dell/AMD relationship appears to be finally thawing down. Dell chief Kevin Rollins made a statement this week that his company has decided not to use AMD chips in any of Dell products.
He admitted to an early leaning towards AMD but was forced to change his mind after Intel picked up speed in product development and production. Rollins said that his company may not offer servers or PCs based on AMD’s chips in the near future.
He said Intel was being preferred because they were steadily improving their technological road map and were better prepared to take up business challenges. They had revamped their manufacturing facilities and were ready with a whole new family of chips that were as good as AMD’s.
Market watchers insist Intel is being preferred because they offer discounts on their chips to sustain Dell’s loyalty. When Rollins took over as CEO last July, he had said in an interview that his company’s relationship with Intel was helping them make a lot of money.
Then there are also those who suggest Dell is toying with the possibility to keep Intel on its toes. In that same interview, he had also said that Dell was not averse to considering AMD’s products if the market trends compelled them to do so.
In November he had this to say about AMD’s Opteron: "We might want to add servers based on Opteron processor to our product line at some point in the future". Their current product line-up is based exclusively on Intel’s Xeon and Itanium 2 processors.
2004 was a significant year for Intel as it had to review its own business philosophy and adopt AMD’s policy of bringing 64-bit extensions to the x86 processor. Change in outlook also meant fixing several manufacturing and design flaws and scrapping two future processor cores.
Whether or not future market winds favor AMD, for the time being at least, one can assume that Dell has ended its reliance on a single company for processors. Analysts are of the opinion that this was only to be expected. A senior analyst said “AMD blew their chances with numerous delays in the release of the 64-bit production version of Microsoft’s Windows O/S.”. The delay gave Intel a chance to catch up and launch its own 64-bit processor that was unveiled last February.
Earlier AMD had made its name as a maker of inexpensive Intel clones, gaining momentum last year by introducing technologies ahead of its arch-rival. It also gained advantage by many delays, cancellations and recalling of Intel products after design and manufacturing flaws were reported.
Intel is currently the undisputed market leader. Market statistics establish this without a doubt: in fourth quarter sales, for every $100 spent on PC microprocessors, $88 went to Intel and only $9 went to AMD. In 2003, AMD had only 3.5 percent of the market for PC server microprocessors, but had jumped to 6.1 percent in 2004, largely at the expense of Intel.
In Japan and Europe, Intel’s market dominance has come under the scrutiny of antitrust regulators after AMD complained that it had muscled its smaller rival out of certain markets.
AMD’s major strength currently is the Opteron chip which has ready takers like major server vendors Hewlett-Packard, Sun, and IBM.
AMD might still have a chance to turn the tables on Intel: their first dual-core Opteron is scheduled for release by mid-2005, whereas Intel’s dual-core Xeon chip won’t arrive before 2006.
