Dell Testing AMD Waters
thestreet.com
<<...this isn't the first time that rumors have surfaced that Dell is considering adding AMD processors to its lineup. And with AMD's increasing importance in the marketplace, and Dell's recent missteps, the prospect of the two companies hooking up takes on greater significance.
Last week Dell pared back its guidance for the third quarter, which it reports Thursday, cutting its revenue outlook and revising its EPS estimate to the low end of its previous guidance.
That warning underscored questions about Dell's strategy of offering only Intel-based PCs and the competitive disadvantage inherent in such a tack. The question is particularly poignant in the market for industry-standard servers, where AMD's Opteron processor has recently displaced Intel as the performance leader. The Opteron's strength has won over Hewlett-Packard (HPQ:NYSE), IBM (IBM:NYSE) and Sun (SUNW:Nasdaq), which have all added AMD-based servers to their catalogues in the past year and a half.
In the second quarter of 2005, Dell's server and networking division accounted for $1.3 billion, or 10% of the company's overall revenue. Not having an Opteron server puts Dell at a disadvantage when competing for customers on a performance and power consumption basis, notes Insight64 analyst Nathan Brookwood. On the other hand, not everyone cares about performance, and conservative IT managers are perfectly content sticking with the Intel name.
And while Intel's close relationship with Dell allows the computer maker to price its servers competitively with AMD-based servers, Brookwood notes that other financial factors also come into play: because a corporation's back-end data center can handle its workload with fewer Opteron processors than Intel processors, the company saves money on software licensing fees, which typically are priced per processor.
Eventually, says Brookwood, the business case for Opteron processors could become an irresistible force for Dell...>> |
