Despite dual core, AMD still out with Dell

Customers could benefit from choice of chips, but would Dell?

Yet again AMD is poised to beat Intel to market with cutting-edge chip technology. But even though some customers are calling for Dell to use AMD processors, Dell -- the lone holdout among hardware makers -- has a strong incentive to pass. With the launch of AMD's dual-core Opteron processors expected this week, Hewlett-Packard, IBM, and Sun Microsystems are preparing to unveil the second generation of their Opteron servers.

At the Dell analyst meeting in Austin, Texas, during the first week of April, however, Dell executives reiterated the company’s short-term intention to remain a one-processor vendor. But as usual, Dell refused to completely rule out the prospect of releasing a product based on AMD’s Opteron server processor or its Athlon 64 desktop chip. Although the company’s ongoing flirtation with AMD does generate headlines, it is designed mainly to wring additional concessions from Intel, according to analysts and industry insiders.

Opteron’s integrated memory controller and multiple Hypertransport interconnects help it outperform Intel’s Xeon processor on many benchmarks, especially those that measure the performance of memory-intensive applications. That advantage is expected to improve with the advent of dual-core processors. Intel’s first dual-core Xeon processors for two-chip servers will share a bus connection to memory, which could hurt the processor’s performance on applications that require the fast shuffling of data to and from memory.

University of Buffalo professor Russ Miller, who runs the university’s Center for Computing Research, cited problems with Intel’s bus architecture design as the main reason why Opteron remains alluring to the high-performance computing community and to business customers as well.

“We don’t see an option from Dell,” Miller said. “But we know this is important to our industry.”

Intel, for its part, has changed its bus architecture in products designed for servers with four or more chips. Its Truland platform, unveiled last month and designed for both single-core and dual-core chips, uses dual-independent front-side buses to double the number of pathways from the processors to the memory.

Opteron’s performance advantage over Xeon should be more evident this year. AMD will start shipping dual-core Opteron this week, but Intel is not expected to release a dual-core Xeon product until early 2006.

HP, IBM, and Sun are all expected to support the dual-core chips this year. HP was the first company to demonstrate a dual-core Opteron server; IBM is expected to release blade servers based on the dual-core chips; and Sun is making dual-core Opteron chips the centerpiece of a new generation of servers code-named Galaxy.

Dell, however, shows no signs of changing its position regarding AMD in the near future, despite the fact that Rollins had several nice things to say about AMD last year.

The flirtation between Dell and AMD heated up in 2004 as Intel floundered with manufacturing missteps and road map detours. Dell executives were concerned about Intel’s future direction at times during the past year, Rollins said at the analyst meeting.

That concern showed in comments Rollins made to InfoWorld editors in November about Opteron. “I am sure there will come a time when we are going to use AMD,” Rollins said, going on to praise AMD’s products and to note that the company held a technology lead over Intel in some areas. Thus far, Dell has expressed more interest in AMD’s Opteron than in the Athlon 64 desktop chip.

But Intel has since stabilized its road map. After declaring in 2004 that it would be far more circumspect about revealing plans and launch dates for future products, Intel used its Intel Developer Forum in February to lift the curtain on a multitude of dual-core designs.

Rollins and Dell have taken notice and have eased back on AMD-friendly rhetoric.

“We believe that Intel acknowledged the challenges … and have been steadily improving their technological road map vis-à-vis AMD,” Rollins said at the Goldman Sachs Technology Investment Symposium 2005 in February. “So now it’s looking like ‘No.’ For a while it was looking like ‘Yes.’ ”

The backpedaling continued at the analyst meeting. Jeff Clarke, senior vice president of the product group at Dell, said the company has seen only “marginal increases” in demand for AMD’s chips from its customers. Michael Dell characterized interest in AMD’s chips as coming from “tire kickers,” not serious buyers.

It is very difficult to find an IT company that does not hold up customer feedback as the primary driving force behind product strategy decisions. But there are other factors at work in the complicated Dell-Intel-AMD love triangle.

Intel is widely believed to offer Dell significant discounts on processors and first crack at new Intel products in exchange for Dell’s fidelity. Rollins alluded to the cost issue at the analyst meeting, saying that the low costs related to its special relationship with Intel are definitely part of the company’s decision-making process.

An Intel spokeswoman declined to comment on the nature of pricing negotiations with Dell, but she said Intel works hard to compete for design wins against AMD on the merits of Intel’s technology.

There are other costs associated with the idea of a Dell Opteron server. At the analyst meeting, Rollins said, “For us to make a shift, we’d have to analyze costs not just from Intel.” Adopting AMD as a supplier would involve setting up new testing and development teams centered on AMD’s products, which would increase Dell’s operating costs, he said. Dell executives are obsessed with keeping operating costs as low as possible, given the low-margin nature of the PC business.

If operating costs rose, so might prices, which would disappoint at least one user.

“If Dell were to offer [Opteron], that’d be great. But if it’s going to cause the prices of other things I’m buying from Dell to go up, I’d rather have it stay the same,” said Chris Ruffieux, vice president of technology at Gannett Media Technologies.

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