AMD Dissed by Dell

SAN FRANCISCO -- Nearly two years after scoring one of its greatest business coups, Advanced Micro DevicesAMD is sliding backwards.

PC marker DellDELL confirmed reports Friday that the vast majority of its AMD-powered consumer PCs are no longer available for purchase online.

Instead, Dell said it's offering consumer notebooks and desktops that feature AMD microprocessors at its newly established network of retail partner stores, as well as through phone orders.

The move doesn't seem to augur well for AMD, and comes at a time when AMD has struggled to field a competitive lineup with chip rival IntelINTC. Last year, AMD was forced to delay the general availability of its long-awaited quad-core microprocessor due to a bug in the silicon.

Shares of AMD were off roughly 4%, or 26 cents, at $6.33 in recent trading Friday.

But while the short-term impact is clearly negative for AMD, the bigger question is whether Dell's move is merely a natural -- and temporary -- reflection of AMD's weak product lineup, or a sign that the PC maker is reverting to its previous business model of standardizing its products on Intel chips.

Dell spokesperson David Frink suggested that Dell might eventually resume offering AMD-based consumer machines online, saying that the company's product mix and distribution plans change over time.

And he stressed that Dell continues to sell the full lineup of business PCs and servers running AMD processors online (Dell also continues to offer a sole consumer desktop model featuring an AMD processor online).

But he wouldn't offer an explanation for why Dell feels AMD-based consumer systems are better suited for the retail channel than for its online sales channel.

"It's a business decision we made in the current timeframe," was all Frink would say.

It's not exactly surprising that Dell would shuffle its lineup to Intel-based PCs, given the current competitive mismatch between the two chipmakers' offerings. With the bug and delays plaguing AMD's quad-core offerings, the chipmaker is fielding a lineup of older generation microprocessors against Intel's newer technology.

"It's tough to position AMD against Intel right now," says Todd Swank, director of marketing at Nor-Tech, which sells branded and white-box PCs to resellers. "Intel really came back with a phenomenal road map and a phenomenal lineup of products."

Whereas Nor-Tech's catalog of PCs were once evenly split between machines featuring Intel and AMD chips, Swank says the company is primarily selling Intel-based PCs at present.

Dell maintained a strictly Intel-based PC lineup for years, and only began offering AMD chips in mid-2006.

But there's little evidence that Dell's decision to offer AMD-based machines has resulted in much of an increase in demand. And Dell's embrace of AMD came just as AMD's products began to fall out of favor among computer buyers.

Meanwhile, some analysts have speculated that ending its exclusivity with Intel means Dell loses advantages ranging from manufacturing cost efficiencies to the preferential treatment that comes from being an Intel VIP customer.

Whether those lost benefits prove strong enough to send Dell back to Intel's exclusive grip seems unlikely, however. Dell, like all PC makers, gains a tremendous amount of pricing leverage by being able to play the two chipmakers off each other -- a position that nobody wants to give up.

And Dell certainly can't afford to miss out and find itself without an AMD-based PC, if the chipmaker eventually comes through with some impressive silicon.