Round Rock (TX) – In a stunning adjustment of its product strategy, Dell today announced that it will be selling high-end server systems based on AMD’s Opteron processor. The move comes in a time Dell is facing increasing competitive pressure, declining market share and soft revenue growth.
AMD apparently has won its most important battle – to convince Dell to use AMD processors in its product line. Kevin Rollins, chief executive officer of Dell, today told analysts that the company will offer high-end, multi-processor servers based on the AMD Opteron processor in an effort to achieve technology leadership. Dell will continue to offer Intel-based servers, especially units based on the upcoming “Woodcrest” (Xeon 5100 series) processor.
Following Dell’s announcement, AMD senior vice president Marty Seyer issued a brief statement, stating: “We welcome Dell (…) We look forward to working closely with Dell in bringing the benefits of AMD leadership in performance-per-watt solutions to Dell customers.”
Since its introduction a little over three years ago, the Opteron processor has become AMD’s most important strategic product that is eating away market shares from Intel in the highest-margin segment of the micro-processor industry. Especially Hewlett-Packard’s (HP) decision to build the server chip into its product line has been a major factor to drive AMD’s success and could have been a decisive factor in Dell’s decision to look to AMD.
During the conference call today, Rollins said that Dell “has some holes in the microprocessor field” and that the Opteron “can fill this hole.” He declined to answer questions on the possible impact of the Opteron processor on Dell’s business, but mentioned that “much will depend on demand in the market.”
While the Opteron will only be offered in Dell’s high-end server systems, Intel is likely to see an effect and possibly further decreased market share. According to a report released by Mercury Research in April of this year, the Opteron chip was used in 22.1% of all X86 servers sold during the first quarter of this year – up form 16.4% in Q4 2005.
Rollins also declined to provide details when Dell decided to offer AMD computers. But it appears that it has been a short-term adjustment in Dell’s Strategy: In February of this year, Bart Arnold, AMD’s worldwide commercial product manager, told TG Daily that there was “no relationship with Dell.” And at the time – when Lenovo announced that it would use AMD processors in its desktops and notebooks, Arnold appeared not to be too worried about Dell: “We highly value our relationships with our existing OEMs,” he said. “We are always looking to grow our market share and have our growth goals in place. And those growth goals do not depend on having Dell as a customer,” he said.