Dell Favors AMD over Intel Chips

Dell has announced that it will begin using processors from Advanced Micro Devices (AMD) in place of those from Intel, as part of a broader plan to regain its lost market share.

Dell said that the AMD-based Dell high-end servers with four Opteron processors will be introduced by end 2006.

The move has major implications for the computer industry because the Dell-Intel association has been one of the mightiest in the world of technology, and is considered a key contributor to Dell's success in the past. However, since last year, AMD has been trying to take on market dominance.

Kevin B Rollins, chief executive, Dell, said that it is a fairly small category that has been given to AMD. He also said that Intel would continue to remain supplier of the vast majority of processors used by Dell. Several pipeline projects will also utilize Intel chips.

Rollins explained that the market had intensified, and that some of the competitors had proved to be a tad stronger than what was originally perceived by the company. Rollins said that Dell is hence making investments in technology and customer experience, to resume its past pattern of growth. As such, the company has planned to speed up efforts so as to reduce costs by around $3 billion. The savings would come from improved quality to lower warranty costs, and from changes in materials and components.

Dell said it intends to spend over $100 million towards improving its customer service that the company acknowledged had deteriorated and affected its image and sales. The company said that it has hired 2,000 new sales and support staff and retrained 5,000 others for this purpose.

According to industry analysts, Dell's switch from Intel to AMD in a small portion of its server line will not go too far in solving problems. However, it is a sign of the company's willingness to change.

Comparing the market situation between Dell and Hewlett Packard (HP), HP has been giving its customers more choice over price and performance. In the earning season, Dell's desktop PC sales grew 3 percent in the quarter while HP sales grew by 1 percent. But in the laptop category, Dell grew only by 12 percent as compared to HP which grew by 27 percent.