Monday, February 13, 2006

Why DELL will go AMD sooner than later

because it has no choice!

0) Because of the competitive advantage of AMD64, DELL will enter the AMD market eventually. But DELL wants to choose the best timing to swicth to AMD --- when AMD64 has wide market recognition and capacity, DELL will just ride the wave. That's the perfect plan. But, INTEL is no idiot.

1) INTEL can't allow DELL to suck its blood any more--lower units and lower ASP leads to lower revenue, more DELL business means less money for INTEL.

2) So INTEL has to eliminate the extra kick backs to DELL.

3) If DELL decides to switch to AMD, then INTEL eliminates the kick backs, DELL will cry loud saying INTEL cut the candies because of AMD, and that's anti-trust violation.

4) So INTEL has to strike first, before DELL makes the move, INTEL must eliminate the rebates. This way DELL has no way to complain, this also weakens AMD's lawsuit a little bit.

5) DELL going AMD will only lead to marginal benefit for AMD at first, it will eat a lot of whitebox AMD business. However, once AMD has the capacity, DELL may go 100% AMD.


Blogger Eddie said...

AMD won't want to go with DELL:

1) Dell's production model requires just-in-time delivery of components. Being capacity constrained as you know, AMD won't leave idle a bunch of processors just in case Dell might want them

2) Dell pays in notes.

AMD can get better deals in the open market. Unless management would like to make concessions to Dell, there is no AMD-DELL announcement before AMD increases significantly its production.

Why is this so difficult to understand?

I am worried because DELLusionals in AMD might start a sell-out on friday once Dell doesn't even mention AMD.

9:32 AM, February 14, 2006  
Blogger Sharikou, Ph. D said...

I wrote in a previous article that DELL deal will be good for AMD stock price but may be harmful to AMD in the long run.

It's best for AMD to have DELL sukcing intel blood and alienating other INTEL customers.

12:14 PM, February 14, 2006  
Anonymous Anonymous said...

eddie: AMD is no longer capacity constrained. They not only have several fabs in the U.S., but have Fab 30 in Dresden, Germany, where they also recently went to production with their new Fab 36, which is an incredibly agile facility capable of adjusting jobs on the fly...called "Automated Precision Manufacturing". In addition to that, AMD also has a deal with IBM, which has plenty of capacity, that says AMD can draw on IBM's capacity if it should ever need to. IBM's fabs use very similar tech and the same process size as AMD's, so the two will have a pretty easy and quick time getting the IBM lines up and going with AMD product, if that should ever be needed. Customer shipments of products from AMD's Fab 36 are to start in first half of 2006. Capacity is no longer an issue.

10:15 AM, February 16, 2006  

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