Dance with Dell

http://overclockers.com/articles1142/

Interesting article. I think its good that Dell is finally planning on using AMD CPUs in some of their systems. Good for AMD at least. Poor Intel has to consider that it might loose its contracts with Dell while worrying about Micro$oft and IBM teaming up on Xbox2 and possibly the PC business.

The one thing I don't understand about the whole article is how "Dell sucks up something like 20% of Intel's total production." equals "If Dell ever stopped buying, Intel's profits drop 60-70%." Lets say Intel makes $100 Million a year on their entire production. Thats saying if Dell stops buying that 20% of Intel production, that Intel's profit goes down 60-70% or $60-70 million. How does 20% of their production equal 60-70% of Intel's profits when Intel sells their CPUs to Dell at a discount since they buy in bulk? Thats saying that Intel makes only 40-50% of their money from the other 80% of the stuff they make. I think Ed has the numbers mixed up.

gustav said:

The one thing I don't understand about the whole article is how "Dell sucks up something like 20% of Intel's total production." equals "If Dell ever stopped buying, Intel's profits drop 60-70%." ....

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Hi , yeah that didnt made sense to me either , maybe he meant Intel's profit drops TO 60-70%?

Interesting reading nonetheless.....how does this guy finds all this info?


aiki

Gross sales and profits are not the same. If Dell stopped buying 20% of Intel's production, Intel would have to either find another market for those processors or scale back production. They would either have to cut prices to drive up demand for the excess or pay for fabs, etc. that were sitting idle. Either way, Intel loses more than the 20% in sales.

Not only that, but Intel doesn't really make x dollars a chip. It's more like they make $0 profit on the chips that pay their manufacturing costs and 100% profit on the chips they sell above that. As an example, let's just say that Intel needs to sell 10 million processors in a year to break even. If they sell 12 million processors that year, they make a profit of their cut of 2 million processors. If they only sell 10 million processors, they make precisely squat. This is overly simplified, but helps to show why Intel is a cash cow and AMD is always struggling to stay alfloat. You need to sell enough processors to cover costs.

Ken

Hmmm. Good news for AMD. Sounds like AMD's priorities at this point should be to keep hot on technological advances to prevent Intel from stealing their thin lead and to expand production to meet up with the extra demand.

Like the article said, this isn't going to amount to a huge amount of extra sales for AMD...not that they really have the capacity to handle that demand...but having their name tied with Dell will help put them on the map with a lot of Joe Sixpack consumers. When people shopping for a PC on Dells website see all the boring email/web boxes using Intel and see the highend "Dell Extreme Gaming System" sporting A64s they're going to start going "AMD?"

Ultimately, a strong AMD is a good thing for even us cheap gaming consumers...even if you would like to continue to see cheap powerful AMD cpus like me...you can't deny that AMD knocking off Intel's crown will likely result in a turrent of serious competition between the two. And competition breeds innovation and lower prices from both camps. Before Intel was content to sit idle on their hands, lengthing pipelines so they could just ramp up the megahertz while largely ignoring AMD. Now they've got a fire under their ***, so that means they'll have to start running.

Intel is into much more than the consumer market, while I'm sure it is important to them, their government contracts for r&d pump out some serious dough. Wish I new what they were building in the fab I worked in, but it was far more extensive and complicated than any other chip plant I've worked on...(6)

what's your job? are you work for intel's fab now?

Electrician, and I haven't been to an Intel campus for a couple of years

arealsparky said:

Intel is into much more than the consumer market, while I'm sure it is important to them, their government contracts for r&d pump out some serious dough. Wish I new what they were building in the fab I worked in, but it was far more extensive and complicated than any other chip plant I've worked on...(6)

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i think like %90 of the worlds top end serevers all run Xeon's - i was reading this the other day.... that is alot of $$$ for Intel


i think it is smart for Dell as now they can advertise their "gaming" systems as "true gaming" systems using AMD's

I like Intel...it's got a good name, very fast, reputable, doesn't overheat, and isn't that bad priced compared to AMD.

geek2005 said:

I like Intel...it's got a good name, very fast, reputable,

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As far as good name and reputable, in general yes. They tend to do a good job insuring stability of their chipsets. Unlike AMD, who mostly depends on other companies to design their chipsets. On the other hand, they have mode some serious errors. They have had serious bugs. The original Pentium had a bug with division. Remember: "Intel inside, don't divide." As for fast, Intel chips were chosen over Motorola for the IBM PC because they were cheaper, not because they were faster (which they weren't). Things have improved since then. I haven't heard of such a serious bug in a while, and the cpus have gotten faster. Still, Intel and AMD have been close for quite a while in terms of speed. Right now, the conventional wisdom says AMD is faster for gaming, Intel is faster for video encoding. They are close in both cases.

doesn't overheat, and isn't that bad priced compared to AMD.

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Back in the days of the T-bird and the P3, AMD was considered much hotter than Intel. Today, with the Prescott (Presshot) and the K8, Intel is having more trouble with heat. As for price, only recently has AMD's prices began to approach Intel.

Man, this it a bit of an old thread.