Wednesday, November 04, 2009

Intel-Dell secret pact exposed by lawsuit

Fun stuff to read. Like a Mafia story. Now, read my analysis back in 2005.

On December 6, 2004, Intel’s Otellini emailed Intel’s Dell account representative about his concern that Dell would defect to AMD: “I had the analysts dinner tonight. One of the analysts … said he talked with Kevin [Rollins] today and Kevin told him it was ‘inevitable’ that Dell would use Opteron…” The next day, the Intel executive promptly forwarded this email onto Dell’s lead negotiator with a plea for help in securing “incremental support” for Dell. Hours
later, Dell’s lead negotiator emailed back that Michael Dell was on board: “Sitting in the car
right next to msd [Michael Dell] as I type. He’s aligned. I’ll get with kbr [Kevin Rollins] when I
return. I’m positive that incremental mcp will get kbr aligned.…”

117. Later in the day, Intel’s negotiator wrote that “we’ve made a lot of progress in the
last couple of months – you guys had a ton to do w/it!! … I’m struggling finding the incremental
meet comp exposure .... I need some help here …”. Dell’s lead negotiator emailed back: “This is
really easy. MSD [Michael Dell] wants $400M more. I’ve been trying to figure out the

118. Three days later, on Dec. 10, 2004, Intel’s Dell account representative submitted
the “list of meet comp terms” for internal approvals at Intel which “assumes we can negotiate
[Dell] down to $300M.” In exchange, the first item on the term list expressed Dell’s
commitment to “Maintain CPU and Chipset MSS [market segment share] --- Commitment to ‘05 roadmap.” In other words, what the payments bought was Dell’s commitment to “maintain”
exclusivity. Intel’s Dell account representative emphasized that “there is no middle ground ...
we either keep them emotionally or pull back the majority of our support….”

In fact, Intel’s payments to Dell shot upward, roughly doubling in less than one
year. Under these circumstances, Dell did not launch AMD-based products at that time.
According to a wire service report dated from Phoenix Feb. 23, 2005: “Dell Inc. has renewed
confidence in Intel Corp. as its sole supplier of microprocessor chips and is no longer seriously
considering rival Advanced Micro Devices Inc. as an alternative supplier, Dell’s chief executive
said … ‘That’s looking like “No”,’ Rollins said of Dell’s decision not to use AMD. ‘For a while
it was looking like “Yes”.’”

In one internal Intel email, an Intel executive imagined the following response by
Dell’s lead negotiator to Intel’s attempts to sell Dell more high-end server CPUs: “[I]f I was
[him], here is how I would respond: ‘I am losing [expletive deleted] mss [market segment share]
cause your CPU sucks and your chipset sucks … I am losing [be]cause HP is using [AMD’s]
opteron and IBM has [IBM’s own chipset product] which is killing [Intel’s chipset product] …
it’s your crap Intel that is causing me to lose!’” He further imagined Dell arguing: “‘And you
want me to spend more money on a stale 5yr old platform … and others will have superior
technology? I know I’m a dumb old Texan, but that even sounds stupid to me!’”


Blogger Scott said...

LOL, you're such a fantool. By the way, you misspelled a word in your title. A word for a secret agreement is "pact" not "pack".


7:18 PM, November 08, 2009  

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