Wednesday, December 07, 2005

How can AMD play the DELL game for fun and profit

Every 12 months or so, the DELL dude plays the same game: "We are actively evaluating AMD, it looks like a yes". Then the INTEL folks reluctantly give more discounts, until the DELL dude says: "It looked like a yes, but it turned out to be a no. But we will keep evaluating AMD".

I bet Dr. Ruiz is getting very mad being played by a dude with only a high school diploma like this.

This year, it was no different. Apparently, INTEL decided that they could give no more. Then the dude made it very real: there were news that 3 Taiwanese companies Honhai, Quanta and Asus making AMD servers, desktops and notebooks for DELL, and could flood the market any time when DELL said yes.

Of course, we know the result of this game...

Now, how can AMD counter this and stop being played like a fool?

The common wisdom is that AMD should punish DELL by refusing to deal. But I find that this is not the best approach.

AMD's competitor is INTEL, not DELL.

Here is my proposal for AMD

1) Actively and publicly engages DELL. AMD should issue regular press releases saying stuff like just sent a quad-core Opteron box for DELL to test(though later the box was found missing), sent dual core Turions to DELL(no real chips, best are sent to HP), established a dedicated team(no real engineers, janitors with regular pizza parties are good enough) working with DELL, etc, etc. DELL dude might be attracted. At least, DELL dude won't say no no no, it will be happy to play along so it can get more deals from INTEL.

2) The threat of DELL entering Opteron market will drive HP nuts, and AMD can get more HP desktop and notebook business in exchange of a promise. To achieve max effect, AMD should always send the best future products to HP (such as quad-core, dual core turion at 15 watts, etc), but issue press releases for engaging DELL (which gets to see no real goodies).

3) INTEL is deeply worried, and decides to sell iAMD64 Xeons and 32 bit Yonah to DELL at even deeper discounts.

4) HP found DELL's Xeon boxes much cheaper than HP's and very hard to compete against on pricing, so it does more Opterons and prices Opterons based on benchmarks.

5) When DELL dude is ready to sign up for dirt cheap Opterons, AMD suddenly says "it now looks like a no".

The result, DELL gets cheaper INTEL CPUs, and HP does more AMD business. The cycle repeats itself over and over.

This will be a win-win-win situation for AMD, DELL and HP, and INTEL will be the only loser.

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