On the bright side for AMD
But the tide could be shifting toward a stronger Dell-AMD alliance, if slowly. AMD has increased its share of the market for server processors in the past few quarters. New customers include America Online, Merrill Lynch, Bell Helicopter and Credit Suisse First Boston.
"We do have discussions with them, and they have been ongoing for years," said AMD spokesman Dave Kroll. "Dell has always been a great customer-focused company. We believe Dell will do the right thing -- we just don't know when."
In servers with four or more processors, AMD also enjoys a substantial cost advantage -- something near and dear to Dell's way of doing business -- because of HyperTransport, an AMD-inspired interconnect technology that Intel has not adopted, according to Brookwood and others. HyperTransport doesn't get nearly the same attention as 32-bit/64-bit functionality, but so far this feature has been more important in the benchmarks Opteron chips have posted.
The smaller company will also come out with dual-core Opterons in the second half of 2005, while Intel won't pull off the same trick with its Xeon processor until the first quarter of 2006. In reality, being first to market won't likely tilt the needle much, but it could build confidence for AMD. The AMD chips also have the potential to perform better than the Intel counterparts because of the input-output data channels.
"AMD would become more attractive if [Dell] were at a clear technical disadvantage," said Dean McCarron, an analyst at Mercury Research.
The tight relationship between Dell and Intel is difficult to underestimate. As the largest Intel customer, Dell enjoys the steepest volume discounts and largest portion of market development funds. Even if Dell started using AMD chips, the company would likely still enjoy these advantages -- veering from its uniform pricing schedules potentially could prompt an antitrust investigation into Intel.
But the chip giant does provide extras to Dell. It has also helped design chipsets and built Itanium-based computers on Dell's behalf to get the PC maker to adopt Intel's technology.
Earlier this year, Intel settled a lawsuit with Intergraph that insulated Dell from liability, though not fellow defendants Gateway or Hewlett-Packard.
Culturally, a bond exists as well. Dell uses the "two in a box" management structure -- putting two executives in charge of one department -- that has been commonplace at Intel for years. When he penned his business biography "Direct From Dell," founder Michael Dell retained the same co-author that Intel's Andy Grove employed to help him write "Only the Paranoid Survive." The blue and ivory buildings with jutting bays on the Dell campus are eerily similar to the ones on Intel's Santa Clara campus.
