Dell's defection to AMD dissected

THE DELL DEFECTION to AMD last month made absolutely no sense to me. There were theories, half-baked ideas, and flat-out fanboi-isms all over the place, though.

The more I thought about it, the less sense it made, and no explanation out there was even close to filling out the majority of the gaps. The biggest question left open was 'Why now?', something that had all the feel of the Star Wars quote 'Leave? In our our moment of triumph?'.

Nothing short of Intel declaring all out war on Dell made sense. Well, that looks to be exactly what Intel did, they just screwed Dell, and signaled probably the largest power shift in the industry in years, but no one seems to have noticed.

Let's start out with the question of what happened, basically Dell picked up a very small line of AMD parts, 4S servers. If server parts are about 10 per cent of x86 CPUs sold, and 4S servers are about ten per cent of that, this leaves the deal with a piddling one per cent of the x86 market. We hear that ten per cent of server sales is worth 30 per cent of the server revenue, not a small amount by anyone's standards. Still, its loss won't break Intel by any means. AMD will get a nice kick in the bottom line. But, let's face it, they bought their Ferraris long ago anyway.

The biggest net effect of the deal was psychological. You could almost hear the Wall Street monkeys peeing themselves as they ran around in circles bumping their heads into things, laughing maniacally. They utterly failed to explain it, and from everything I read, those that did try were flat out wrong.

The explanations they came out with were that AMD was going to continue to steamroller Intel for the next few decades, but the Woodcrest numbers threw cold water on that plan. Their mouths were foamy at the idea of K8L, but again, that's a year out. Intel production limited? That is a six-month thing, not nearly enough for Dell to make a switch, much less jeopardize the billions that Intel funnels its way to keep that upstart HP in place.

Dell was comfy, and if it had to sling dull boxes at a few fewer-than-anticipated numbers for two more quarters, it was worth it for the preferential treatment they got for being 100 per cent Intel.

The rabid conspiracy people also brought up the lawsuit, and this has a grain of truth to it, but not for the reasons that anyone I ever read up on mentioned. The problem here is that AMD forced Intel's hand with the lawsuit, and the result was that all-out war on Dell I mentioned. Yes, the industry-shaking news was that Intel is pricing fairly. Oh the shock and horror. What's next, their sales reps having to tow the official line on fair play?

Think about this for a minute, Dell has always got the best deals, got the best CPUs at the most favorable timing. For Intel, there was Dell and others, with little mom-and-pop outfits like IBM and HP being lumped in with Eugene's Bait, Yarn and CPU Discount Warehouse. This is the main reason Dell could hammer everyone into the ground, it got such preferential pricing on the most expensive component of said dull black boxes that if everyone else matched everything else, they would still win.

Make no mistake about it, when Intel cut this out, it gutted Dell. Apple is the new darling at Intel, while it also makes black boxes, it also makes prettier white ones that go better on stage, and Otellini's kids were probably pestering him for iPods. Dell is in deep trouble, it has no R&D, and HP can now match it on price.

The jump to AMD was not a market shift, or a large signal of upcoming CPU supremacy in any way, shape or form. It was simply a backhand to Intel for screwing them. If you look at the flailing on Wall Street over this, it seems to have worked, Dell and AMD stock up, Intel down. I'll bet that pissed off Intel financial types.

Looking out over the next year or so, Intel will mostly likely take back a lot of 1S business, some 2S, and get its face tap-danced on in 4S until Tigertown. Even then, there are very compelling reasons why AMD may retain the crown, so that is why Dell, once unshackled, made the moves itdid. If any of the various superiority or inferiority claims made by the pundits were even close, Dell would be selling AMD all over the place immediately, or at least offering it all over. You will notice that did not happen. It will keep trickling products in here and there, where there is a pricing advantage, nothing more, nothing less.

So, why did Intel declare war on Dell? Simple, AMD is likely to screw them both in the lawsuit.

All of the rumblings I have heard say that AMD knows where the bodies are buried, and this summer should have some fairly colourful anecdotes surfacing. Are these whispers actionable? Damn good question. Either way, based on the way Intel is reacting, it looks like it is trying to blunt any judgment against it with the age-old 'we don't do that anymore' excuse. Ending blatant favoritism is a good start, and pre-emptively doing it is one hell of a chunk of plausible deniability, and plays well to semi-educated jurors.

So, this momentous technology announcement is nothing more than a grumpy backhand from Dell with love to Intel. Why did Intel do it? AMDs lawyers. What does AMD gain? A level playing field* and some headlines.

It is not the monumental advance that people claim, it is just PR and spite. Don't you love this industry? µ

* No, I am not naive enough to think that there won't be a new level of evil schemes to make up for it, but they will no doubt be much more evenly applied** than the current scheme.

** Fat chance.