Dell Eyeing AMD Again?

Dell Inc. and Advanced Micro Devices Inc. could soon be more than neighbors in Texas, reports say.

Financial firm Piper Jaffray & Co. suggests, in a report released this week, that Dell, headquartered in Round Rock, Texas, near AMDs Austin offices, is eyeing a second-half introduction of AMD-processor systems.

Such an introduction—Leslie Santiago, a senior researcher analyst and the reports primary author, suggests Dell Opteron servers could be among the products—would sweep away Dells status as the only large PC maker not offering AMD chips in at least one product line. For Dell, offering AMD-processor systems, particularly servers, would present a broader array of choices for business customers.

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"Based on conversations with our sources in the PC supply chain, on recent press reports suggesting that Asian ODMs [designers and manufacturers] are developing AMD-based systems for Dell, and on distributor comments noting shortage of AMD processors due to the possibility of Dell building AMD processor inventory, we strongly believe that Dell will start AMD-based system shipments as early as 2H06," Santiago wrote.

But, despite what many including AMD CEO Hector Ruiz believe is an inevitable move to offer AMD chips, Dell could also be playing a game of brinksmanship with Intel Corp., as appears to happen from time to time. During 2004, a particularly difficult year for Intel, Dell executives made overtures about a switch. But by early 2005 they began expressing confidence that Intel was getting its road map back in order. Late last year, for example, Dell executives said the companys ninth-generation server line, which is due this spring, will use Intels 65-nanometer server chips.

Dell President and CEO Kevin Rollins, in an eWEEK interview published earlier this month, said offering AMD doesnt make business sense for the PC maker. During that interview, Rollins said selling both Intel and AMD product lines would be confusing to its sales team and customers. He also said Intel appears on the verge of catching up with AMDs performance per watt.

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AMDs Opteron server chip, for one, is regarded by many as having distinct advantages over Intels Xeon.

But "Intels got a better road map coming up, in terms of performance and in terms of thermals in the coming year, so thats been very encouraging for us," Rollins said.

Piper Jaffrays Santiago, however, suggests a new scenario may be unfolding.

Dells founder Michael Dell hinted about offering AMD chips during last weeks 2006 International Consumer Electronics Show in Las Vegas, and Dells sales force, Santiago wrote, has been clamoring for an Opteron server to sell against those from rivals such as Hewlett-Packard Co., IBM and Sun Microsystems Inc.

"We further note Michael Dells recent comments noting the distinct possibility of shipping AMD-based systems," Santiago wrote. Also, "Our conversations further indicate that Dells sales force is demanding Opteron-based server offerings to be able to better compete in the market."

Other analysts are also sensing that Dell may be nearing an agreement with AMD.

"I think theyre on the cusp of a deal," said Roger Kay, president of Endpoint Technologies Associates Inc., in Wayland, Mass.

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