Dell can no longer define itself as simply the provider of the lowest-cost, quality x86 servers on the market. Its competitors have made significant improvements in their own manufacturing supply chains and processes, which have resulted in more competition in the high-volume, low-price arena that Dell has ruled for so long.
The new servers will be based on Intel's latest Woodcrest platform that uses the company's newest dual-core processors based on its Core architecture. Intel and Dell say Core will allow dramatically increased performance while also improving power efficiency. Those are the dynamics that Advanced Micro Devices has been using so effectively over the past two years to eat away at the market that Intel has so long dominated.
How big an impact has Dell's strict allegiance to Intel had on its recent problems? While Sun has used new systems based on Advanced Micro Device's Opteron processors to build a completely new business, and Hewlett-Packard and IBM have given their customers a choice between AMD and Intel, Dell clung to its long-term ally even as AMD steadily increased its share of the x86 server market.
It may have been AMD's success in the four-way server space that finally convinced Dell to pull the trigger. According to research firm Gartner, AMD now owns 48% of the U.S. market in the four-way segment, and 36% of the worldwide market. Sometime later this year, Dell will be adding its own Opteron-based servers to the mix, most likely to address the four-way segment. And the question remains if the AMD flirtation will be a one-trick pony, or if Dell will begin filtering the alternative processor throughout its portfolio.
There are some signs that this isn't a case of too little too late for Dell. This week word leaked that Dell had secured a potentially major win with the technology company that has been garnering the kinds of headlines that Dell used to enjoy. Dell will supply its new servers to Google for use in the Internet giant's Search Appliance systems that it sells to enterprises. That deal alone could easily total in the tens of thousands of systems.