Brief: Dell Will Finally Use AMD Chips

It was almost anticlimactic when Dell slipped a mention into its quarterly financial statement that it would sell servers based on chips from Advanced Micro Devices, breaking from its longstanding strategy of only selling computers with Intel chips. But the disappointing first-quarter results speak volumes about why Dell made the move.

Dell will sell servers based on AMD's dual-core Opteron processor before year's end. No word on AMD-based PCs and laptops. All the other big server manufacturers--Hewlett-Packard, IBM, and Sun Microsystems--offer AMD-based systems. AMD's share of the x86 processor market has grown past 20%, and 25% isn't unreasonable this year.

The move has been anticipated since last fall, when Dell started selling standalone AMD processors on its Web site. This month, Dell joined the AMD-led Green Grid Consortium to improve energy efficiency in the data center.

Dell's use of AMD processors seemed inevitable as AMD gained market share the past two years in the server market. And Dell has struggled to meet earnings expectations, including last week's announcement that quarterly revenue grew 6% from a year ago to $14.2 billion, but net income dropped 18% to $762 million. CEO Kevin Rollins said competition was "more intense than we had planned for or understood." Having AMD chips won't end that. But it will put Dell on the same field as its competitors.