Dell to Launch AMD Server

Dell will use Advanced Micro Devices' Opteron chip.

The Austin, Texas, PC maker has long been an Intel shop. But it intends to change that later in 2006, when it will begin offering a multi-processor AMD Opteron server.

Dell, which announced its first-quarter earnings May 18, said in a statement that it would begin offering "AMD Opteron processors in our multi-processor servers by the end of the year offering a great new technology to our customers at the high-end of our server line."

The Opteron server, which will be a four-processor machine, will be sold alongside new Intel-based servers, Dell indicated.

Previously, Dell executives had indicated that they had discussed using AMD's chips internally, from time-to-time. But the company never launched a product.

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Kevin Rollins, Dell's CEO, said in a conference call with reporters that the company chose to introduce an Opteron server, now, based on customer demand.

However, "We're only announcing the use of the Opteron products in the very high-end" of the server business, Rollins said. "It's a fairly small category in terms of units."

The Opteron will fit into an area where Dell currently sells few Intel chips, Rollins said.

Although the PC maker will continue to deliver Intel-based servers, including a ninth generation of machines based on Intel's dual-core Woodcrest chip—a processor Intel has said will bow in June—and has not announced plans to use AMD chips elsewhere, such as in desktops.

"We think we've got a winning combination of bringing winning technology to all of our customers in all categories," Rollins said.

"Intel has been a great partner [and] is going to stay a great partner. They've got great technology; they are still going to remain the vast majority of the processors that we buy."

The way some analysts see it, Dell is giving the market what it wants.

"Customers have been clamoring for Opteron-based servers for a while now," said Roger Kay, president of EndPoint Technologies Associates in Wayland, Mass. So "Dell is responding."

"They will be introducing an Opteron-based MP server by year end. We're very pleased with that," said Marty Seyer, vice president Commercial Business and Performance Computing at AMD in Sunnyvale, Calif.

"They've been evaluating [our] technology for some time. We knew it was a matter of when, not if, they'd be announcing an Opteron server. We're particularly pleased they're announcing one at the high end."

The Dell-Opteron announcement, however, comes after several difficult quarters for the PC maker, culminating in an atypical slip in which the PC maker's unit shipment growth fell below that of the market as a whole in the first quarter of 2006, according to IDC and Gartner Group.

Dell then warned on May 8 that, due to price cuts it enacted to spur demand, its first-quarter earnings would be below expectations.

Dell, which has historically boosted its unit shipments faster than the market, stumbled in the first quarter.

The company continued to lead in shipments with a market share of between 16 and 18 percent, IDC and Gartner numbers show. But its unit shipments increased by about 10 percent versus the market rate of about 13 percent, according to the firms.

"The growth engines in the market are the areas that [Dell] doesn't play in," said Richard Shim, analyst at IDC in San Mateo, Calif., in a recent interview.

The markets, Shim indicated, included channels and retail, in addition to AMD-processor systems.

Editor's Note: This story was updated to include comments from analysts as well as Dell and AMD executives.

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