Re: What's the business case for doing so?
To sell more systems, and at higher margins.
What market segments are they missing out on?
10% to 30% of the "non PC" Server and workstation segments, where margins and per unit revenues are far higher than in Dell's mainstream skus. Parts of the desktop and notebook X86 markets, too. They're also losing out on the benefits of having a second source for their most critical parts. When Intel CPUs or Intel supporting chipsets are limited in any particular segment, Dell loses customers to HP, IBM, etc. - every time, since Intel doesn't allow Dell to second source.
How many of these would actually be new customers who aren't cannibalizing existing sales of Intel boxes?
They'd either be new or they'd be current customers that would stay with Dell instead of moving to HP, IBM, or Sun. Another note is that once a previously all Dell shop starts buying some Compaq or Sun servers so they can stay withing their server room power budget, it becomes a lot easier to add some workstations, storage and desktops into the mix.
Is Dell's R&D infrastructure scalable enough to handle the sequestering of development teams, labs, equipment and other resources required to protect AMD and Intel's intellectual property and appropriately honor non-disclosure agreements?
LOL!! Do you think that Dell maintains seperate operations for the notebooks from Quanta vs. Compal? Disk drives from WD vs. Hitachi? Motherboards from Intel vs. Asus? They're parts - anybody can buy them and anybody can assemble them into systems.
Dell's problem is one of short term vs. long term. If they sell a single AMD system, they lose their perferred vendor disounts, which have no direct costs associated with them and so are pure profit. What those amount to is a closely guarded secrect, but it's likely they represent (between discounts, rebates, and other payments) 5% of Dell's gross revenue, and Dell's gross margins were 8.77% this year. Short term, buying parts from a free market, instead of the "commisariat of CPUs" would wreak havoc on quarterly profits at Dell. Long term, this keeps Dell firmly under the thumb of Intel.
Long term this means that Dell, which had been on a trajectory to becoming the next IBM - a standard for organiztational computing - now finds itself locked out of becoming a one stop shop for customers because it doesn't offer whole familes of systems that are required by more and more public and private institutions and corporations.
Putting a cap on Dell's market share is likely an intentional strategic move by Intel, since if Dell were to expand its business much further, then Dell could start dictating terms to Intel vs. the current situation.
There are signs that the market is beginning to recognize that Intel has decided to put a cap on Dell's market share, and that there isn't really anything that Dell can do about it. If Dell sells even 1 non-Intel system, WHAM! Dell's profits are cut by hundreds of millions of dollars as Intel raises Dell's costs on every other system that Dell sells. |
