Dell takes care of Wall Street, not customers with AMD move
Dell took the unusual step of announcing the new Opteron product line in its financial statement. Companies almost never reveal products in this manner with good reason. Data center managers don't spend as much time as Wall Street poring through a company's financial figures.
And Dell's move resulted in major financial movements. AMD's shares jumped 15 per cent in the after-hours markets, while Intel's dropped 5 per cent. Dell's shares, meanwhile, bumped up a little bit, despite it reporting a staggering 18 per cent drop in profits and despite analysts' fears that Dell's pledge to overhaul its products and support was all talk.
Dell's AMD ruse provided the desired effect. It attached the Dell name to "a winner," made it look like the company was listening to customers, made it seem like the beginning of a broad product revamp and also went some ways to convincing analysts that Dell has a concrete plan for change.
The problem with all this is that Dell is only going to ship a four-socket AMD box. Such midrange gear makes up the slowest selling part of the x86 server market. Historically, Dell has pared back efforts to play in this part of the server market, shouting that customers really care about one- and two-way boxes.
We doubt that Dell will sell a ton of four-socket boxes, although having such an Opteron system around gives it a nice edge over IBM, which is still paying off its X3 chipset commitment to Intel.
While practical, Dell's four-socket Opteron move does not indicate that it's listening to customers any more than it used to. Intel simply cannot match AMD at the four-socket level, and Dell had no choice but to pick up Opteron if it wants to sell any such systems. Dell was brought kicking and screaming to this scenario and decided to make the most of it by pleasing investors with a bit of eye candy.
Over the next year, you can expect HP's Opteron server business to grow. You'll watch Sun near the $1bn mark for its Opteron server business. And you'll see a host of start-ups and companies such as Rackable nibble away at Dell's volume sales with their Opteron systems. In addition, you'll see Dell unable to bid on a raft of enormous supercomputing deals that have come up and which often dictate Opteron as the preferred processor of choice. IBM, HP and Sun will make a big deal of their wins with these customers, and we'll have more on that next week.
Dell Chairman Michael Dell said yesterday that the Opteron systems "filled a hole" in the company's lineup. Well, it certainly wasn't a hole in customers' hearts. By going so shallow with its Opteron play, Dell has proven that its love for Intel remains more important than its love for customers.
Lucky for Dell and AMD, Wall Street doesn't care in the short-term how many actual Opteron servers Dell will sell. Investors like the fact that Dell has embraced the darling of the moment. They like the fact that Dell seems to be changing and trying to emerge from a protracted slump.
Dell's management had a pretty good hunch investors would buy this line. And, for that, they deserve some credit. ®
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