Dell to use AMD chips this year: analyst

Move will come towards end of the year. By Tom Krazit

A financial analyst issued a report on January 10 predicting that Dell will drop its exclusive use of Intel chips this year and introduce servers based on AMD's Opteron processors. Les Santiago, an analyst at Piper Jaffray & Co, issued that day a report based partly "on conversations with our sources in the PC supply chain" saying Opteron servers bearing Dell's brand are expected to appear in the second half of the year. Ever since AMD's Opteron came onto the market, Dell has scrambled to explain why it has continued to exclude AMD's chips from its portfolio despite the performance advantage of the Opteron over Intel's Xeon. Most often, Dell tells reporters and analysts that its customers aren't really asking for the Opteron products and that if Dell were to switch, it would incur product development and support costs that would hurt its low-cost operating model. But other companies, such as HP, have embraced Opteron. One oft-heard reason for Dell's stance is the widespread industry belief that Dell receives preferential treatment, such as early product introductions and discounts on chip purchases, for remaining loyal to Intel. Those allegations are part of the antitrust lawsuit filed by AMD against Intel last year that claimsIntel rewards its customers with selective rebates if they buy fewer AMD chips. Intel has denied those charges. Many analysts also believe that in order to maintain that preferential treatment, Dell occasionally floats suggestions within the media and analyst community that it is thinking about switching to AMD's chips. The theory is that Dell extracts concessions from Intel by threatening to end its loyalty. Competition between the companies on server chips has only grown more intense since both companies introduced dual-core processors. Dell has always said that if it were losing business to Opteron servers from its server competitors, it would have to make a switch to stay competitive. But company Chairman Michael Dell told IT users at Gartner's Symposium IT/Xpo in Orlando last October that he believed Intel's 2006 road map would tip the competitive balance back in Intel's favour. Spokesmen from Dell and AMD did not immediately return calls seeking comment. The disclosure form at the end of the report notes "Piper Jaffray was making a market in the securities of Advanced Micro Devices at the time this research report was published. Piper Jaffray will buy and sell Advanced Micro Devices securities on a principal basis."

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