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Will Dell ask AMD to dance?

The chances of a Dell/AMD partnership are closer today then ever before

Despite denials from Dell CEO Kevin Rollins that it will not partner with AMD, it is my guess they will sooner rather than later.

Dell has always relied on Intel chips for its hardware and the main reason for that is simply supply. Intel has the facilities to produce the kinds of quantities Dell is looking for. AMD does not. But what AMD has today is something Dell doesn’t and desperately needs. That is mindshare with HP, IBM, and Sun. AMD Athlon and Opteron chips are fast and built specifically to run workstations and servers.

IBM, Sun and HP have seen the light and are shipping AMD-based hardware with success. Dell has been left out because they are again late to the game.

Don’t get me wrong. Intel chips do run servers and they do a great job, but for Intel it is about gigahertz and not raw speed. AMD made a calculated bet on speed and it seems to be winning.

Now Intel still beats AMD in market share by a good margin. According to recent figures from American Technology Research, AMD market share is at 35 per cent.

Intel has noticed this and has countered with an historic deal with Apple Computer to put its Pentium class chips on Mac hardware.

Dell’s recent stock woes are a clear indication the once great direct dealing power is hurting.

Dell’s mantra is market share and without it the company does not have the leverage it needs to keep prices down and in its favour.

AMD is holding all the cards here and does not need Dell. It has sold every processor it has manufactured. True, it does have another facility up and ready to go if needed. When the Dell deal is finalized that facility will become operational. However, do not expect Dell to get the sweetheart deal it currently has with Intel. AMD is fine without Dell. It is Dell that needs AMD. AMD is fine supplying chips to IBM, Sun, HP and the system builders.

The Apple deal
Intel has already covered itself with Apple. The only one left without a plan is Dell, except to beg its Texas-based cousins to help it out. And, believe me it will. When this deal is done, however, it will be the channel who again gets knocked down a peg.

AMD may not favour Dell initially because it already has IBM, Sun and HP ahead of Dell, but certainly the direct seller will go ahead of the system builder community. Supply could be a problem going forward, but needless to say dark days may loom for Dell if it continues to drag its feet with AMD.