“We believe there will be an AMD/Dell deal announced very soon; more specifically, we believe it will come as early as March and involve Dell notebooks,” said analyst Doug Freedman of American Technology Research, in a report. “The deal will likely mature from there to include servers and desktops, in that order, in subsequent months.”
The move could be a blow to Intel Corp., which has been the sole supplier of processors to Dell. “With the announcement, we believe shares of AMD will rally and shares of Intel will decline,” he said. “While both stocks already reflect an AMD/Dell deal to some extent, we believe there will still be a reaction in the range of 10 percent for AMD shares and a decline of 5 percent for Intel.”
The analyst believes that Intel must set a new and different course going forward. “Although we are not in total agreement with Intel management's present direction or vision, we do believe that should things remain off course, the board will be forced to step in and make the necessary adjustments,” he said. “Intel needs to do more to improve its total solution cost and not enter into a price war with AMD until it can introduce new technology that will be able to take back share.”
For now, though, AMD appears to have the upper hand. “Currently, AMD is in a strong position with price advantage as the low cost provider, and a technological advantage with its SOI, low power, integrated memory controller, and dual core solution,” he said.
“While we are buyers of AMD, we believe it cannot physically produce enough processors in 2006 and 2007 to take more than 20-25 percent market share,” he said. “This will give Intel time to repair some of the damage it has sustained over the course of 2005.”