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Dell ‘looking closely’ at AMD's Opteron – again
Been here before - so what's changed?
The old 'Dell to offer AMD-based systems' chestnut has been pulled from the roasting tray again following comments made by various senior Dell executives to the effect that the company is taking a very close look at AMD's Opteron chip.
So we have Dell COO Kevin Rollins telling a Merrill Lynch conference that the PC giant is looking at the new 64-bit CPU "very closely". And in a Fortune article on AMD's new baby, Rollins says: "We are looking very closely at AMD's products right now."
The same article notes a comment made by Michael Dell himself at the World Economic Forum, held in Davos, Switzerland earlier this year. "We're open to whatever our customers want," he said at the end of a discussion about Dell using AMD's chips.
Now there's no doubt AMD would very much like to have Dell on board, as would the company's many fans. Apart from IBM, AMD has no top-tier server vendor support for Opteron, and if it's to build credibility with business buyers, that's exactly what it needs. AMD may have a good reputation in the consumer PC space, it has relatively little standing in the business computing arena, particular in the server segment.
And Dell remains the one major vendor AMD has yet to crack. Dell remains an Intel-only supplier, and AMD would love to change that. Whether that's an issue for Dell's customers, however, is open to question. Certainly they appear happy with the status quo - Dell's not exactly losing customers, after all.
But can we read anything into Rollins and co.'s comments? For a start, it's hard to imagine that Dell wouldn't be looking at Opteron. What server/workstation vendor isn't going to take the opportunity to check out new processor technology when it arrives. We've heard similar comments concerning Dell's interest in almost every new chip AMD has launched during the past three or four years, but to date the manufacturer hasn't gone on to use one of them.
In the Fortune piece, Dell CTO Randy Groves offers one reason why: "Until now, AMD's value proposition has been Intel compatibility at a lower cost," he says. "Now it's not a pricing discussion. [AMD64] is something Intel doesn't have."
This is interesting for two reasons. The obvious one is the acceptance that AMD64, the 64-bit technology on which Opteron is based, takes AMD to a new level. The second reason is more puzzling. If AMD is offering Intel compatibility at lower cost, why isn't Dell, that most price-driven of PC vendors, more interested in its products? Groves' comment suggests that Dell hasn't bought AMD before because of price. It can't be because those prices were too low, so it must be because Intel was cheaper.
It has often been claimed, but never confirmed, that Intel offers Dell preferential pricing, either because of Dell's weight or to ensure it remains an Intel-only shop. Groves' comment is the closest we've come to a statement from either company that that's the case.
Now, with Athlon and its predecessors, Dell could make that trade-off work, threatening to take AMD's chips if Intel wouldn't give it a better deal. Opteron changes that by delivering, as Rollins says, something Intel doesn't: 64-bit computing at 32-bit prices. Dell can no longer say to Intel, give us the same but cheaper. No matter how far Intel discounts Xeon, for example, it still can't provide 64-bit processing. And there's no way - well, no sensible way - it's going to cut Itanium 2 pricing to Opteron levels.
But before AMD supports start celebrating AMD's conquest of Dell, it's clear that nothing's going to happen until customers start asking Dell for Opteron-based systems. Rollins implied at the Merrill Lynch gig that Dell is waiting for customer interest to hit the point at which the company's spreadsheets tell it that it could make money selling Opteron-based systems. That spreadsheet will undoubtedly factor in Intel's discounts and the effect on Dell of losing them, so we'd imagine that a very large number of potential orders will have to come Dell's way before it starts offering Opteron.
And that is unlikely to happen before Microsoft ships Windows Server 2003 with AMD64 support, an event not expected before the summer. Businesses interested in Opteron's potential will want to evaluate systems before they commit to the new processor. Given current corporate spending patterns, that could take some time, and AMD has to convince them first that its technology has a place in the business computing environment.
In short, there's a long way between 'looking closely' and 'buying' - and many a slip twixt the two. ®