Updated from 2:28 p.m. EST
, the staunchest ally of
in the computer world, ready to see other people?
In a research note published Monday, Legg Mason analyst Cody Acree noted that Dell has quietly begun selling processors made by
Advanced Micro Devices
on its Web site. Dell is not offering any computers with built-in AMD processors; rather, it is selling stand-alone AMD chips.
"Whether Dell will, or will not, offer AMD systems is anyone's guess, but the likelihood seems to be increasing, in our opinion," wrote Acree, whose firm has provided services to Intel in the past 12 months. "Why would Dell be willing to sell stand-alone MPUs if the next logical step were not to begin offering complete systems?"
A Dell spokesperson wouldn't answer that question, saying the company does not comment on speculation. He said that while Dell currently ships all its PCs with Intel processors, it is always evaluating technology from AMD and other companies.
However, this isn't the first time that rumors have surfaced that Dell is considering adding AMD processors to its lineup. And with AMD's increasing importance in the marketplace, and Dell's recent missteps, the prospect of the two companies hooking up takes on greater significance.
Last week Dell pared back its guidance for the third quarter, which it reports Thursday, cutting its revenue outlook and revising its EPS estimate to the low end of its previous guidance.
That warning underscored questions about Dell's strategy of offering only Intel-based PCs and the competitive disadvantage inherent in such a tack. The question is particularly poignant in the market for industry-standard servers, where AMD's Opteron processor has recently displaced Intel as the performance leader. The Opteron's strength has won over
, which have all added AMD-based servers to their catalogues in the past year and a half.
In the second quarter of 2005, Dell's server and networking division accounted for $1.3 billion, or 10% of the company's overall revenue. Not having an Opteron server puts Dell at a disadvantage when competing for customers on a performance and power consumption basis, notes Insight64 analyst Nathan Brookwood. On the other hand, not everyone cares about performance, and conservative IT managers are perfectly content sticking with the Intel name.
And while Intel's close relationship with Dell allows the computer maker to price its servers competitively with AMD-based servers, Brookwood notes that other financial factors also come into play: because a corporation's back-end data center can handle its workload with fewer Opteron processors than Intel processors, the company saves money on software licensing fees, which typically are priced per processor.
Eventually, says Brookwood, the business case for Opteron processors could become an irresistible force for Dell, particularly since it may not be until 2009 that Intel's server processors will effectively rival AMD's processors for performance and power efficiency.
Other industry experts, however, say Intel could have a competitive server processor out in the first half of 2006, making it possible for Dell to convince corporate customers to hold out a little longer.
Ultimately, though, not everyone is convinced that the root of Dell's troubles is related to the Opteron. "The server issue isn't helping for sure," says Gus Zinn, an assistant portfolio manager who covers technology companies at Waddell & Reed Investment Management, a growth-oriented fund which holds Intel shares. But Zinn says Dell's biggest issue is that it can't meet its margin targets at the low end of the PC market, where much of the growth is.
Moreover, says Zinn, adding AMD chips to the product line would harm Dell's cost advantage, because of the underlying expense of adding a different processor.