Yet again Advanced Micro Devices (AMD) is poised to beat Intel to market with cutting-edge chip technology. But even though some customers are calling for Dell to use AMD processors, Dell -- the lone holdout among hardware makers -- has a strong incentive to take a pass. With the launch of AMD's dual-core Opteron processors expected this week, Hewlett-Packard, IBM, and Sun Microsystems are preparing to unveil the second generation of their Opteron servers.
Dell executives reiterated the company's short-term intention of remaining a one-processor vendor at Dell's analyst meeting in Austin, Texas, during the first week of April, but as usual refused to rule out the prospect of releasing a product based on AMD's Opteron server processor or Athlon 64 desktop chip. The company's ongoing flirtation with AMD generates headlines, but it is mainly designed to wring additional concessions from its primary chip supplier, Intel, according to analysts and industry insiders.
Opteron's integrated memory controller and multiple Hypertransport interconnects help it outperform Intel's Xeon processor on many benchmarks, especially ones measuring the performance of memory-intensive applications, according to third-party reviewers. That advantage is expected to improve with the advent of dual-core processors. Intel's first dual-core Xeon processors for two-chip servers will share a bus connection to memory, which could hurt the processor's performance on applications that require the fast shuffling of data to and from memory.
University of Buffalo professor Russ Miller, who runs the university's Center for Computing Research, cited the issues with Intel's bus architecture design as one reason why Opteron is an alluring option for the high-performance computing community as well as some business customers. In conversations with executives including founder and Chairman Michael Dell, Miller has expressed his satisfaction in working with Dell's sales and engineering teams but also stated his desire for a Dell Opteron server, he said in an interview at Dell's analyst meeting.
"We don't see an option from Dell. But we know this is important to our industry," Miller said.
Intel has changed its bus architecture in products designed for servers with four or more chips. Its Truland platform, unveiled last month and designed for both single-core and dual-core chips, uses dual-independent front-side buses to double the number of pathways from the processors to the memory.
Opteron's performance advantage over Xeon, however, should be more evident this year. AMD will start shipping dual-core Opteron chips this week, but Intel isn't expected to release a dual-core Xeon product until early 2006.
Hewlett-Packard, IBM and Sun are all expected to support the dual-core chips this year. Sun is making dual-core Opteron chips the centerpiece a new generation of servers code-named Galaxy. HP was the first company to demonstrate a dual-core Opteron rack server design last September, and IBM is expected to release blade servers based on the dual-core chips.
But Dell shows no signs of changing its position regarding AMD in the near future, even though Rollins had several nice things to say about AMD last year.
The flirtation between Dell and AMD heated up in 2004, as Intel floundered with manufacturing missteps and road map detours. Dell executives were concerned about Intel's future direction at points during last year, Rollins said at the analyst meeting.
That concern showed in comments Rollins made to editors from IDG's InfoWorld in November about Opteron. "I am sure there will come a time when we are going to use AMD," Rollins said, going on to praise AMD's products and note the company held a technology lead over Intel in some areas.
To date, Dell has shown much more interest in Opteron than Athlon 64, the PC version of the chip. At a recent event in San Francisco highlighting a new generation of Dell notebooks designed for gamers, Dell Director of Mobile Marketing Gretchen Miller acknowledged the appeal of the Athlon 64 to the gaming community but said that the combination of Intel's newest Sonoma mobile technology and high-end graphics chips from Nvidia Corp. outperformed the Athlon 64 on certain tests. Reviews from Web sites devoted to the gaming community tend to favor AMD's Athlon 64 chips over Intel's Pentium 4 chips.
But Intel has stabilized its road map since November. After declaring in 2004 that it would be far more circumspect about revealing plans and launch dates for future products, Intel used its most recent Intel Developer Forum in February to lift the curtain on a multitude of dual-core processor and chipset designs.
Rollins and Dell have clearly taken notice, and eased back on their AMD-friendly rhetoric.
"We believe that Intel acknowledged the challenges ... and have been steadily improving their technological road map vis-a-vis AMD," Rollins said at Goldman Sachs & Co.'s Technology Investment Symposium 2005 in February. "So now it's looking like 'No.' For a while it was looking like 'Yes,'" he said.
The back-pedaling continued at the analyst meeting. Jeff Clarke, senior vice president of Dell's product group, said the company had seen only "marginal increases" in demand for AMD's chips from its customers. Michael Dell characterized interest in AMD's chips as coming from "tire-kickers," not serious buyers.
It's very difficult to find an IT company that doesn't hold up customer feedback as the primary driving force behind product strategy decisions. But there are other factors at work in the complicated Dell-Intel-AMD love triangle.
Intel is widely believed to offer Dell significant discounts on processors and first crack at new Intel products in exchange for Dell's fidelity to Intel. Rollins alluded to the cost issue at the analyst meeting and in an interview last year, saying that the low costs related to its special relationship with Intel are definitely part of the company's decision-making process.
An Intel spokeswoman declined to comment on the nature of its pricing negotiations with Dell, but said the company works hard to compete for design wins with AMD on the merits of its technology.
There are other costs associated with the idea of a Dell Opteron server. At the analyst meeting, Rollins said that "for us to make a shift, we'd have to analyze costs not just from Intel." Adopting AMD as a supplier would involve setting up new product testing and development teams centered on AMD's products, which would increase Dell's operating costs, he said. Dell executives are obsessed with keeping operating costs as low as possible, given the low-margin nature of the PC business.
If operating costs rose, so might prices, and that would disappoint at least one Dell user.
"If Dell were to offer (Opteron), that'd be great. But if it's going to cause the prices of other things I'm buying from Dell to go up, I'd rather have it stay the same," said Chris Ruffieux, vice president for technology at Gannett Media Technologies International in Norfolk, Virginia.
In the end, Dell will have to be confident that the revenue from Opteron servers or Athlon 64 PCs would offset the rise in operating costs that would accompany its break from an Intel-only strategy, Rollins said. Another possible catalyst for a reversal in its Opteron plans would involve the loss of a high-profile customer to HP, Sun, or IBM because that customer wanted Opteron servers.
Dell plans to reach US$80 billion in yearly revenue by 2009, and might need to tap into Opteron demand if the chip takes off beyond its current status in the market. But given that Intel still has around 90 percent of the market for low-end servers based on the x86 instruction set, Dell can still afford to hold back on Opteron, despite the increased interest of customers.