Dell and AMD: No longer a matter of "if"?

I am not a big gambler, but I’m about to go out on a limb.

My goal when I started writing publicly was to create interesting truthful (some might say opinionated) articles on the industry with a fresh perspective. At the same time it gives me the opportunity to offer intimate insight on VoodooPC and what we do.

Even though Voodoo is a small boutique company I believe we have our finger on the pulse of the industry. We tend to see industry trends months (or years in some cases) before the mainstream market takes notice. We witness all of this by crafting the most bleeding edge luxury PC systems available today. By testing all of the latest hardware we almost always see industry shifts well ahead of time.

I hold Dell in high regard, even when the channel partners “beat people up” who use Dell laptops at channel meetings - you have to give it hand it to them. Ten million PCs in a quarter is nothing to sneeze at. In July of 2005 I wrote a controversial article entitled “Is it time for Dell to file for Divorce?” I wrote the article to simply question why a company as leading edge as Dell wouldn’t consider using the best technology in their systems. I am sure there are many reasons why they haven’t pulled the trigger until now, and only Dell can answer those.

Are you ready for this?

After all the writing, and living, eating, and breathing the technology day and night – I am now of the mind that the Dell AMD relationship is not just a matter of speculation, I would say it is imminent, and it is not a question of “if” but “when”. Even though analyst Ben Lynch and other analysts quelled these rumors, I still challenged them with their recommendations here, here, and here. Looking back I recall they put a sell recommendation on AMD with targets pinned squarely at $26 - and here we are today and it’s holding strong at $40+. In this business you can’t simply depend on analysts to make industry predictions, you have to understand the technology and realize how it affects the industry.

Dell needs AMD in order to get back in front of the Tier 1 OEM pack. They need to procure the best technologies, and they probably realize that they need to offer choices. I imagine Michael Dell is looking forward to reinvigorating his brand, and creating excitement within his company again.

Dell can no longer do business with an Intel only relationship. You can argue with me until you’re blue in the face, but when Dell finally transitions some of their products to AMD those with blinders on might become green in the face instead. It’s probably best that people in the channel prepare themselves, and realize that Dell procuring AMD products will only increase AMD’s ability to innovate new and exciting technologies.

So as I sit back and prepare myself for the onslaught I have to weigh the pros and cons of AMD doing a deal with Dell. On one hand I imagine Dell will do whatever it takes to expand its business, and rightfully so. On the other hand there is the matter of the high end luxury PC market of which the Voodoo brand has settled in nicely. I consider it a pending challenge – and the PC industry is much like the automotive industry, there is room for Ferrari and there is room for GM.

Will AMD allow Dell to cherry pick their best components and leave the rest for the others? Doubtful, knowing the AMD of today I would suggest that they will be calling the shots and they will ensure that there is a decent spread of technology throughout their portfolio.

Dell also has other markets to attack, including the server market - I imagine this will be their largest focus as they ramp up to launch a full line of Opteron 64 based servers. In the server market there is some heated competition between Sun, HP, Dell, and boutique companies like Rackable. Pure speculation here, but the recent news of a Dell Google relationship has me thinking that Google may eventually buy Opteron based servers from Dell.

That leads into the possibility of acquisitions. Dell will probably consider making acquisitions of companies who use AMD products in their systems in order to expand their portfolio. Certainly Dell can manage by themselves, but the possibility of acquisitions means that they can accelerate into certain markets quicker while expanding their growth potential. Dell doesn’t have a history of making acquisitions, but then again they don’t have a history of dealing with AMD either. Times are changing.

So with that being said I would say that this is good news for AMD and Dell. AMD should tread carefully as they are going into un-chartered waters, but generally speaking current AMD customers should view this as good news. It’s clear that AMD will not replace Intel completely for Dell, but it will be nice to see them finally get the recognition they deserve.

Then again, I could be wrong, and this article could end up with the rest of the rumors, bunk, and speculation. If I am right, let’s just hope AMD doesn’t forget their roots….though something tells me that they won’t.