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Dell to buy AMD chips

Dell Inc. said Thursday it will start using microprocessors from Advanced Micro Devices Inc. in some of its high-end servers.
/ Source: Financial Times

Dell signalled a significant shift in alliances in the personal computer world on Thursday as it announced it would end its exclusive use of Intel microprocessors and begin buying from Advanced Micro Devices.

The move underscored Dell's difficulties in competing with rival Hewlett-Packard and others in the PC server sector, where Intel's chips have been outperformed by those of AMD. It was a further blow for Intel, which has suffered market share losses to AMD in recent months and disappointed on earnings.

For AMD, the decision represented a major breakthrough — it has supplied every other major PC manufacturer apart from the number-one company, Dell. Its shares rose 14 per cent in after-hours trading on Thursday in New York on the news. In early trading on Friday morning, they tacked on 10.1 per cent to $34.50.

"This is outstanding news, we are just jumping for joy here that Dell has embraced AMD," said Marty Seyer, senior vice president of AMD's commercial business.

Dell said in its quarterly earnings report that it planned to introduce multiprocessor server computers that would use AMD's Opteron processors by the end of the year.

But Kevin Rollins, chief executive, commented: "Intel are still going to remain the vast majority of the processors we buy."

Scott McLaughlin, an Intel spokesman, said it was a competitive industry and the multiprocessor sector had been a challenging one. But he said a new processor, codenamed Tulsa, would be available in the second half of the year.

Mr Seyer said AMD had reinvigorated the server segment where four processors were installed in systems, providing owners of data centres with major savings on power use and greater "performance-per-watt", the new de facto standard of performance for the industry.

Dell's timing could be seen as a determination to recoup market share or as a sign of impatience with Intel.

Roger Kay, analyst with Endpoint Technology, commented: "This was a long time coming, I think the pressure was on Dell to make a move like this, the server area is where Dell was hurting the worst.

"The gap in performance is going to be tighter [in the second half], but enterprise customers who already have Opterons need more than a dead heat to reconsider."

Mr Seyer said he was convinced that AMD could retain a lead and "keep the performance-per-watt crown."

He would not speculate on whether AMD would go on to order processors for the rest of its business, but said:

"I do not know of any other server customer that started at the high end and did not go wider with the product line."

The Dell-Intel exclusive relationship has lasted longer than the "Wintel" alliance with Microsoft, although Intel made its own breakthrough last year when it wooed Apple away from IBM and Freescale Power PC processors.