Dell, in a company first, is readying multiprocessor servers based on Advanced Micro Devices Opteron chip.
The Austin, Texas, PC maker, which has long been an Intel-processor-only shop, said on May 18 that it intends to add the Opteron to its multiprocessor server line—machines that offer four or more processors—before the end of the year.
Dell, which also announced first-quarter earnings 33 cents a share on revenue of $14.2 billion—in line with its lowered estimates—on May 18, said that the decision to use the Opteron chip was threefold, involving customer demands, technological capabilities of the Opteron, as well as the need to fill a gap at the high-end of its server product line.
“At the higher-end, the multiprocessor space, we think we could do better. We think now that the Opteron product can fill a hole there,” Kevin Rollins, Dells CEO, said during a conference call with analysts.
Meanwhile, “There was a clear acceptance [of Opteron among customers.] The question of technology at the high end was a situation where AMD was very successful. The technology was good there and so were using it.”
Previously, Dell executives have indicated that they had discussed using AMDs chips internally, from time-to-time. But the company never launched a product.
Despite what is likely to be seen as AMD getting its foot in the door at Dell, Rollins played down the possibility that the PC maker might move on to offer other AMD-processor products in areas such as its PC lines.
Moreover, he said the PC maker will continue to deliver Intel-based servers, including a ninth generation of machines based on Intels dual-core Woodcrest chip—a processor Intel has said will bow in June—as well as Conroe and Merom.
Conroe and Merom, otherwise known as the Core 2 Duo chip lines for desktops and notebooks, respectively, are due this summer. Conroe will come first in July, followed by Merom in August, Intel has said.
“We think weve got a winning combination of bringing winning technology to all of our customers in all categories,” Rollins said.
“Intel has been a great partner [and] is going to stay a great partner. Theyve got great technology; they are still going to remain the vast majority of the processors that we buy.”
At least one Dell business customer applauded Dells decision, saying it was something that he had been pressing the systems maker for months to do.
Lew Moorman, senior vice president of strategy and corporate development at Rackspace Managed Hosting, a San Antonio, Texas, company that runs more than 17,000 servers in five data centers, said that power and cooling are among its top concerns, while its customers care more about performance than processor brand-names.
“Were in the hosting business, and power is important,” Moorman said. “AMD chips consume a lot less power than Intel chips, at least today.”
Given Rackspaces experience with power consumption—roughly a third of its servers are Intel-processor Dell systems, while the rest are Opteron-based white-boxes—the company has been asking Dell for Opteron systems. But it has also been “aggressively looking at other suppliers” for Opteron servers, Moorman said, based on the belief that Dell was not planning to sell Opteron servers.
Thus the Dell Opteron server news took him by surprise.
“Well have to see how aggressive they are with this,” Moorman said. “I certainly hope they are aggressive in their timeline and their breadth of offerings. Its good that theyre doing this, but it would have been nicer if they had done it before.”
Is Dell too Late
to the Party?”>
The way some analysts see it, Dell is giving the market what it wants, even if it is late to the party.
“Customers have been clamoring for Opteron-based servers for a while now,” said Roger Kay, president of EndPoint Technologies Associates in Wayland, Mass. So “Dell is responding.”
Charles King, an analyst with Pund-IT Research, said it was about time Dell made this decision.
“Its a reflection of the market,” said King, in Hayward, Calif. “Its a tough time for IT sales, and you stick with your formal and informal partners as long as you can. But if theres a competing product thats having so much success that your customers are looking elsewhere, you need to make a decision.”
King said he was surprised that Dell held out for as long as it did, probably under the mistaken belief that Intel would be able to come out quickly with products that would overrun AMDs offerings.
However, Opteron has carved a place for itself in the marketplace, and it isnt going away, he said.
“Opteron was a great product and it continues to be a great product,” King said. “It would behoove Dell to get this as quickly as possible, because Opteron is here to stay.”
The Dell-Opteron announcement, however, comes after several difficult quarters for the PC maker, culminating in an atypical slip in which the PC makers unit shipment growth fell below that of the market as a whole in the first quarter of 2006, according to IDC and Gartner Group.
Dell continued to lead the market in overall unit shipments, with a market share of between 16 and 18 percent, according to initial quarterly estimates by IDC and Gartner Group, released on April 19.
But its unit shipments increased by about 10 percent versus the market rate of about 13 percent, according to the firms.
“The growth engines in the market are the areas that [Dell] doesnt play in,” said Richard Shim, analyst at IDC in San Mateo, Calif.
Those markets, Shim indicated, include indirect sales channels to businesses and retail, in addition to selling AMD-processor systems.
AMD executives were naturally pleased with the development after having gained the business of IBM, Sun and Hewlett-Packard in the server space with its Opteron chip.
Dell “will be introducing an Opteron-based [multiprocessor] server by the end of the year. Were very pleased with that,” said Marty Seyer, vice president commercial business and performance computing at AMD in Sunnyvale, Calif.
“Theyve been evaluating [our] technology for some time. We knew it was a matter of when, not if, theyd be announcing an Opteron server. Were particularly pleased theyre announcing one at the high end.”
Seyer declined to say whether Dell was working on other AMD products. However, he pointed out that few Opteron customers have used just one product in its Opteron line. Most offer several products based on the chip, he said.
Intel appeared to take the news in stride.
“We appreciate that Dell shows strong support for the bulk of our product offerings and believes in the strength of our roadmap,” an Intel spokesman said in an e-mail.
“Our intent is to deliver on that strong product roadmap and support Dell and its customers such that they desire Intel platforms.”
“The MP niche has been a challenging one but our next generation Intel Xeon processor MP, [code-named Tulsa], shipping in the second half of 2006, will provide a competitive product” to the Opteron, he said.
Editors Note: This story was updated to include comments from analysts as well as Dell, AMD and Intel executives.