UPDATE 2: Dell to ship AMD-based desktop PCs in September

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UPDATE 2: Dell to ship AMD-based desktop PCs in September

Round Rock (TX) – Confirming earlier rumors about a possible extension of the business relationship with AMD, Dell announced today that it will be building AMD processors into its “Dimension” desktop computers and 2P server products. Chief executive Kevin Rollins hinted that AMD will not only fill a gap in Dell’s portfolio, but will also be a tool to convince Intel to drop its prices.

Just about three months ago, Dell told analysts during the Q1 conference call that it will be using AMD Opteron processors in its high-end, 4P server line. Today, the company followed up with an announcement that the Opteron chip will also be used in 2P servers and AMD desktop processors in its mainstream “Dimension” desktop PC family. The company declined to comment on specific AMD products, previous speculations that there also may be AMD-based Dell notebooks in the near future and just how many Dell computers will be carrying AMD processors.

Banc of America Securities analyst Sumit Dhanda released a report prior to Dell’s earnings release, which stated that Dell is preparing between 1 million and 1.2 million new AMD-based desktop systems and about 800,000 AMD-based notebooks. That would bring the total number of AMD processors to about 2 million processors. Dell did not confirm these numbers and did not confirm that it will be offering notebooks later this year.

However, chief executive officer Kevin Rollins provided some information on what role AMD will play in Dell’s product strategy. During the conference call with analysts, he explained – and confirmed speculations – that, among other reasons, the move was triggered by Dell’s observation that the company was losing market shares in certain markets. “We have been shut out of the AMD technology market and the growth of [the x86 server] business.” Rollins was referring in particular to the 2P and 4P server market, in which system builders such as Sun Microsystems and Hewlett-Packard were able to post substantial gains in recent quarters – mainly by using the Opteron processor, which is considered to be superior over Intel’s Xeon 7000 series processor in terms of performance and power consumption.

Interestingly enough, Dell will offer a 2P Opteron server in a time where Intel is considered to offer a very competitive or even superior solution with its Xeon 5100 “Woodcrest” processor. This move will spark new speculations that Dell will be using AMD as a negotiation tool to force Intel to lower its prices. Rollins mentioned during the conference call that “multiple suppliers” will be a “benefit to customers.” One of the key reasons for Dell’s disappointing quarter result, according to Rollins, was that “component prices did not come down as anticipated.” A closer relationship with AMD certainly will be an advantage for Dell to drive down processor prices faster and more in line with Dell’s expectations.

The executive acknowledged that the adoption of AMD processors will cause “some startup costs.” But the company believe that this cost will be paid back “quickly, because of the nature of this thing.”

It did not take long for AMD to react to Dell’s announcement with its own statement. “Dell’s wider embrace of AMD processor-based offerings is a win for Dell, for the industry, and most importantly for Dell customers,” said Marty Seyer, senior vice president at AMD. “Dell’s plan to expand the AMD footprint serves as a powerful statement on the strength of the AMD processor roadmap, as well as the demand that exists for AMD technology in Dell products. We look forward to working closely with Dell in bringing to their customers the benefits of AMD 64 technology, the industry’s open innovation platform.”

What remains is the question of Dell’s plans with AMD’s mobile processors. But assumed that Dell in fact is preparing two million AMD-based systems for this holiday season, the implications especially for AMD’s mobile processors could be significant. So far, the Turion 64 processor and its Turion 64 X2 were not able to tackle Intel’s dominance in the mobile PC segment. If AMD plays the Dell game smart, then consumers could see a whole new situation in the notebook segment in the not-too-distant future – especially if we consider the fact that AMD may already be working on a Centrino-like platform with ATI.