Dell Cozies Up to AMD

PC maker adds opteron chip to its multiprocessor server arsenal

Dell, in a company first, is readying multiproc-essor servers based on Advanced Micro Devices Opteron chip.

The Round Rock, Texas, PC maker, which has long been an Intel-processor-only shop, said May 18 it intends to add the Opteron to its line of multiproc-essor servers—machines that offer four or more processors—before the end of the year.

Dell, which also announced first-quarter revenue of $14.2 billion and a profit of 33 cents a share—in line with its lowered estimates—said the decision to use the Opteron was based on customer demands, the chips technological capabilities and 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," Dell CEO Kevin Rollins said during a conference call with analysts. "[Meanwhile,] there was a clear acceptance [of the 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 they had discussed internally, from time to time, using AMD chips in their products. But Dell never launched such a product.

Despite what may be seen as a change of heart at Dell, Rollins played down the possibility the company might offer other products using AMD chips. He said Dell will continue to deliver Intel-based computers, including a ninth generation of servers running on Intels dual-core "Woodcrest" chip—due in June—as well as desktops and notebooks using Intels "Conroe" and "Merom" processors.

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.

At least one Dell business customer applauded the companys Opteron decision. Lew Moorman, senior vice president of strategy and corporate development at Rackspace Managed Hosting, in San Antonio, said power and cooling are among Rackspaces top concerns, while its customers care more about performance than processor brand names. Rackspace runs more than 17,000 servers in five data centers.

"Power is important," Moorman said. "AMD chips consume a lot less power than Intel chips, at least today."

Given its experience—roughly one-third of its servers are Intel-based Dell systems, whereas the rest are Opteron-based white boxes—Rackspace has been pushing Dell to offer Opteron servers but also "aggressively looking at other suppliers" for the machines, Moorman said.

"Well have to see how aggressive [Dell is] with this," Moorman said. "Its good that theyre doing this, but it would have been nicer if they had done it before."

Analysts agreed Dell is attempting to offer customers what they want, even if it is late to the party. "If theres a competing product thats having so much success that your customers are looking elsewhere, you need to make a decision," said Charles King, an analyst with Pund-IT Research, in Hayward, Calif. "The biggest mistake a vendor like Dell can make is giving customers a reason to talk with the competition."

Indeed, Dells Opteron announcement comes after several difficult quarters for the company, culminating in an atypical-for-Dell slip in which the PC makers unit-shipment growth rate fell below that of the market as a whole in the first quarter of this year, according to IDC and Gartner Group.

Dell, as has been customary in recent times, continued to lead the market in overall unit shipments for the first quarter. The company had a market share of between 16 and 18 percent, according to initial quarterly estimates by IDC and Gartner released April 19. But Dells unit shipments increased by about 10 percent versus the market rate of about 13 percent, according to IDC and Gartner.

In response, Dell management has resolved to cut prices, increase product quality, and bolster service and support as part of an effort to return to growth.

AMD executives naturally were pleased with Dells Opteron announcement after having gained the business of IBM, Sun Microsystems and Hewlett-Packard in the server space with the chip.

"Theyve been evaluating our technology for some time. We knew it was a matter of when, not if, theyd be announcing an Opteron server," said Marty Seyer, vice president of commercial business and performance computing at AMD, in Sunnyvale, Calif. "Were particularly pleased theyre announcing one at the high end."

Senior Editor Jeffrey Burt contributed to this story.