The Dell De-emphasis

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Dell has decided to de emphasize AMD.

Both AMD and Dell have tried to spin this into a nonevent, but that’s putting lipstick on a pig. This is bad news, period. You don’t do this when you’re doing well with a product line you’re selling.

On the other hand, “bad” doesn’t necessarily mean “catastrophic.”

There’s a lot of possible reasons why Dell decided to do this. We’ll eventually find out why, but part of the reason is likely to be that this might have been AMD’s idea.

Now that Fab30 is mothballed, and all sorts of conversions need to be made to Fab36 to handle K10s/45nm, AMD may not be able (or willing) to keep pumping out large quantities of low-end X2s to Dell for next-to-nothing.

Yes, AMD machines will continue to be sold through other Dell channels, like retail. but let’s not pretend this is a substitute for online sales.

I think another part of the reason for the Dell de-emphasis is that AMD is in no position to offer K10s bigtime to OEMs any time soon, and probably won’t until the second half of the year, maybe not until late in the second half.

After reading the Dell comments, I get more of a sense of hiatus, a warning shot, than inevitable phaseout. Reading between the lines, I get a sense of “when you have something new and good for us to sell, give us a call, but until then . . . .”

Of course, if AMD can’t do that within a reasonable period of time, Dell has itself positioned to pull the plug entirely.

The Dell de-emphasis emphasizes AMD’s real problem in any attempt to recover. It’s not enough for them to fix their chips, they then have to start making tons of them yesterday, and what they really need to do fairly shortly is start making tons of 45nm chips. Even if they’re second-rate to Intel’s latest, they have to be better than X2s.

What do I mean by “tons?” Oh, I’d say at least ten million K10s a quarter, that’s somewhat more than half of total production. To be or not to be, Hector, that is the question.

Ruiz and Company shouldn’t be asked, “When can you start making X CPUs?” They should be asked, “When can you make ten million K10s, of any type, a quarter?” followed by “When can you make ten million 45nm K10s, of any type, a quarter?”

Real answers to those two questions (or at the very least the first) will be a sure sign AMD has its act at least somewhat together, and refusing to answer such questions will be just as sure a sign that they don’t.

Period. No ifs, ands or buts. These questions set a hard, objective target for which the execs will and should be held accountable. It would reveal what AMD is actually capable of doing in 2008/9, and blows away any PR hot air and stunting that might be tried.

Any serious, competent company would be happy to answer these questions, or at the very least (in the case of 45nm) say when they’d be able to answer it. Only a clown company would refuse to answer these questions. “We won’t say,” really means either “the answer will make us look really bad” or worse, “we don’t know.”

The Long-Term Effect

The biggest impact of this Dell de-emphasis could well be on the AMD/Intel lawsuit. If they don’t know already, Intel will certainly want to know why this happened.

And since the core reason(s) for the de-emphasis is unlikely to be anything like “Sorry, AMD, your machines are just too good and we are just making too money selling them,” any and all negatives will certainly be added to Intel’s pile of “we’re not evil; they’re stupid” ammo depot.

Obviously, Intel would like it even better if Dell turned the de-emphasis into a divorce, but they’ll take anything they can get.

This point cannot be emphasized enough. All bad news and doubletalk from AMD is double good news for Intel, first immediately, then as part of Intel’s lawsuit defense.

The arguments about Intel’s rebate systems and other actions being anticompetitive are likely to be technical and based on legal arcana, but it is essential for Intel to make AMD look as incapable and incompetent as possible at trial, to win, or at least minimize any penalties.

And I’m afraid a lot of what the AMD execs have been saying is going to come back to haunt them when that trial starts.

Ed


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