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Computer industry

Dell's Shift in Processor Supplier Could Send Shock Waves Through Industry

Strategic Insights

— 1 min read

Dell's CEO Kevin Rollins' recent positive comments about chip maker Advanced Micro Devices Inc. (AMD) have sent shock waves through the industry, leaving analysts to speculate about a potential shift in Dell's processor supplier. As the only major computer maker not using AMD's processor chips, a change would be a significant blow to Intel Corp., which has long dominated the processor market. AMD's 64-bit chips have been highly praised, and the company has signed up nearly all major computer makers as customers, except for Dell.

Key Takeaways:

  • Dell's CEO Kevin Rollins has expressed a more favorable disposition towards AMD, citing the company's high-performance computing products as more advanced than Intel's in some cases.
  • AMD's 64-bit Opteron processors have been widely praised and have signed up nearly all major computer makers as customers, except for Dell.
  • Analysts speculate that Dell may switch to using AMD's processor chips, which would be a significant blow to Intel and a major boost for AMD.
  • Intel has struggled in 2004 with disappointing product introductions, scrapped product plans, and a large inventory of unsold chips.
  • Dell has close discussions with AMD in the past but has always backed away from using its chips, leading some analysts to believe that this may be a ploy to negotiate better terms with Intel.
  • If Dell were to switch to AMD, the symbolic impact would be more pronounced than the economic impact, given Intel's significant market share and revenue.

Statistics:

  • Intel is expected to report nearly seven times as much revenue as AMD in 2004, with projected revenue of $34.6 billion compared to AMD's $5.1 billion.
  • Intel's projected net income for 2004 is $7.8 billion, compared to AMD's projected net income of $200 million.
  • AMD supplies less than 10 percent of the server market, but its market share is growing by 2 to 3 percentage points each quarter.
  • Intel supplies more than 80 percent of the processors that go into Windows-compatible computers.

Sources:

  • Pacific Crest Securities, "Financial Performance Comparison: Intel vs. AMD"
  • ZDNet UK, "Dell's Kevin Rollins talks up AMD"
  • Midwest Research, "Dell's relationship with AMD"
  • Insight64, "AMD's server market share"
  • Reuters, "Intel struggles with product introductions in 2004"

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