Rumor Mill off-base on Dell-AMD

In the next few days, a lot of people are going to claim that they predicted the deal between Dell and AMD.

And the one constant is that no one really did.

To recap, Dell on Thursday said it would adopt Opteron chips from Advanced Micro Devices for four-way servers. It's not a huge market--only a few of these get sold a quarter. But these machines sell for a lot and can be profitable. It's also a market that AMD has done particularly well in lately to Intel's detriment.

By picking AMD for this sliver of the market, Dell can improve its standing against IBM and HP and at the same time not cut its purchases from Intel much, thus preserving those nice volume discounts from Intel.

A lot of people said it made sense for Dell to adopt AMD chips, but there certainly weren't a lot of "Dell to do four-way AMD servers" rumors floating around in the last few weeks or months. Instead, people noted that Dell had lost market share and partly because the company didn't have AMD chips.

In fact, the recent predictions about an AMD-Dell fall down when they get to specifics.

In January, Doug Freedman of American Technology Research said Dell would announce an . whoops.

A few weeks before that, Les Santiago said that "We strongly believe that Dell will start AMD-based system shipments as early as (the second half of 2006)," Santiago wrote in a report. He based his view on conversations with unnamed sources in the PC component supply industry, press reports indicating Asian designers are working on AMD-based systems for Dell, AMD inventory shortages suggesting Dell is purchasing the chips and other factors.

There's only one problem with that. Dell's decision to do a four-way wouldn't cause a chip shortage, according to Nathan Brookwood, an analyst at Insight 64. Dell also makes its own servers (but uses Asian vendors for notebooks) and probably hasn't even bought chips for these servers yet. Therefore, although Dell is adopting AMD chips, it has nothing to do with Santiago's data.

Why was it so tough? Dell is a secretive place. This is the one company that will make major executive changes without telling anyone. AMD has also been tight-lipped and disciplined when it comes to Dell.

Most importantly, Dell has come close many times over the past several years, making it nearly impossible to predict. In 2002, Dell was cozying up to AMD when Intel had yet to commit to coming out with a 64-bit version of its Pentium or Xeon chips. Intel relented and the deal fizzled.

The rumor mill kicked up again in late 2004. One analyst told me once that there was sort of a Defcon 5 alert from AMD's pr team about a vague, but "really important announcement" that never occurred in late 2004. Things quieted down in 2005.

Technically, Dell started selling AMD chips earlier this year with the Alienware acquisition, but those boxes are still labeled as Alienware boxes first.

You can picture how these meetings often went down. There's a big stack of paper on the desk of Michael Dell. He's holding a pen. He then turns to AMD CEO Hector Ruiz and says "I have to think about it." Hector goes out to the parking lot and shakes his fist at an indifferent universe.

This time they probably had to get the heart paddles out.

 

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