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Dell drops AMD chips from many machines

Dell Inc. has stopped selling many computers with processors from Advanced Micro Devices Inc. on its Web site, although it will continue selling some through retailers.
/ Source: The Associated Press

Dell Inc. has stopped selling many computers with processors from Advanced Micro Devices Inc. on its Web site, although it will continue selling some through retailers.

The news was a setback for AMD, which wooed Dell for years before breaking the computer maker's exclusive supplier relationship with Intel Corp. in 2006.

Intel still made the processors used in most computers sold on, but AMD raised its profile in the chip field by being inside some Dell machines.

Shares of Dell rose 2 cents, to $19.45, while AMD shares fell 25 cents, or 3.8 percent, to close at $6.34 Friday.

Dell's move caused a stir online that the company tried to tamp down. A spokesman, David Frink, called the development — which Dell disclosed to consumers on the company's Web site — "not even all that interesting."

"We regularly adjust our product offerings and how customers can purchase those products," he said. "The majority of our consumer AMD-based systems are available through our retail partners and telephone sales."

Frink said Dell is "committed to the AMD product line as a long-term partner to provide flexibility and maximum choice for our customers." will continue to offer desktop and notebook computers and servers with AMD processors for business customers, and a single consumer-oriented desktop model with an AMD processor.

About 80 percent of Dell's sales are made to business, government and education customers, and about 20 percent to consumers. The company is trying to bolster its consumer business by breaking from its strict reliance on Internet and phone orders to offer machines through a growing list of retailers.

Dell machines with AMD processors can still be had at retailers such as Wal-Mart Stores Inc. and Best Buy Co. Round Rock, Texas-based Dell declined to say what percentage of the machines it sells directly or through retailers use AMD processors.

AMD spokesman John Taylor said AMD could benefit from Dell's push into retail sales, and the shift at "is not a near-term significant financial impact on AMD."

"We feel very good about the relationship with Dell and the growth ramp we've experienced," he said.

AMD recently reported that it lost $3.38 billion last year due to heavy charges for writing down the value of a graphics chip maker that it bought in 2006. AMD predicts it will return to profitability in the second half of this year.

The company, based in Sunnyvale, Calif., has also been plagued by flaws in a new line of server chips.

Roger Kay, a technology analyst with Endpoint Technologies Associates, said the harm to AMD could be minimal if Dell sticks with AMD processors for machines sold through retailers. But, he said, AMD might be pressured into cutting prices on those chips.

AMD "may be very aggressive about pricing to protect volume," Kay said. "That would help Dell, because retail is more price-sensitive." He said lower-priced processors could help Dell compete on store shelves against machines from Acer and Hewlett-Packard Co. that also use AMD chips.

Dean McCarron, an analyst with Mercury Research, said Dell's decision was surprising but perhaps not a disaster for AMD as Dell expands its presence in retail stores.

"The impact will probably be relatively neutral," he said. Dell "didn't drop AMD completely. They put AMD in the segment they expect to grow."

Intel declined to comment.