Dell and AMD

Dell is going to stick with Intel.

It’s important to understand why, not the reasons of the day why, but the deep underlying reasons why.

The one sentence explanation is: Dell is not geeky.

The slightly longer explanation is: Dell is no more a “computer company” (as the term is normally used) any more than Walmart is. In fact, if you want to find a comparable company to Dell, look at Walmart, not HP or anybody like that.

No one would ever accuse Walmart of caring about computers as computers, or loving computers for themselves, or because they think they’re cool. No, for Walmart, it’s just product to be moved as cheaply and efficiently as possible (with reasonable quality) because that’s what their customers want. It’s the same way with Dell.

People often think Dell and Walmart are hypermodern companies because of the various technologies they use. They’re not. Deep down inside, Dell and Walmart aren’t twenty-first century companies, they’re really throwbacks to late nineteenth century companies. Back then, the motto of leading companies like Standard Oil and Sears and Roebuck was “Provide reasonable quality goods that customers want, cut the company’s costs to the bare minimum, pass most of the savings onto the customers, and make a lot of money.”

Do you see the word “performance” in there? “Coolness?” Anything else even vaguely geeky?

Sure, most companies say that’s what they’re about, but these two companies not only walk the walk, they’re obsessed by it. It’s their Prime Directive, and if something contradicts that, they don’t do it. Yes, Dell and Walmart are big on using technology, but those late nineteenth century companies were, too. What they all had and have in common is that technology is merely a means to the end: to fulfill the Prime Directive.

It worked back then, and it works now.

Let’s take this principle and apply it to the current situation.

By using only one processor line, Dell simplifies its technological overhead. It doesn’t have to worry about creating and maintaining an AMD knowledge base, contacts, suppliers, etc.. By sticking to one supplier, you get efficiency of scale.

Mind you, simplicity is not an end, it’s a means to an end. If Dell could make significantly more money with a new product line than without, and/or if a large percentage of customers will go elsewhere unless Dell provides the product, simplicity won’t be allowed to stand in the way then. But only then.

The average Dell customer is not a geek. If you asked the average Dell owner what he or she has, he or she doesn’t say, “I have an Intel machine.” He or she says, “I have a Dell.” To them, Dell is a brand like Panasonic or Sony; they care little more about what chips power their Dell as they do what chips power their Sony WEGA. If anything, they’d probably prefer Intel, but most wouldn’t go out of their way to get a machine with one

Only geeks care about things like that, and only geeks would demand having Hammers powering their machines. And sorry, folks, there aren’t too many geeks out there compared to Joe Sixpacks out to buy Dells.

Servers are a different matter. Geeks are a much bigger proportion of the buying population there, and items like x86-64 have real immediate impact in that world.

Of course, the danger for Dell was that eventually a lot of non-geeks might start noticing that Intel was floundering and start demanding AMD. Tons of lost sales is definitely against the Prime Directive. So Dell used another time-honored nineteenth century business practice, squeezing the supplier, but this time not for price, but features. Dell must have essentially told Intel, “If you can’t beat them, join them.” I’d bet dollars to doughnuts that we’re seeing x86-64 Intel processors today, and dual-cores sooner rather than later because Intel was told, “Mikey likes it.” Actually, the real reason is “Mikey doesn’t like lost sales.”

BTW, Intel announced the 600 line Sunday, and guess who is already selling Dimension 8400 with them inside?

How Dare You Not Want My Money?

So Dell got enough from Intel to let it continue to stay focused on Intel’s product and keep its typical customers from defecting, and said “Sayonara” to AMD.

This upsets AMDers quite a bit, and they yammer about Dell forfeiting all these AMD sales.

Consider this: Dell’s main rivals sell AMD systems. If there were such demand for AMD systems, they ought to be flourishing, and Dell should be floundering. Look at sales, though, and it’s exactly the opposite.

How could this be if AMD-ness were so important?

The obvious answer which nonetheless eludes many AMDers is that AMDness isn’t too important to too many people compared to the overall computing population, and Dell can easily afford to ignore those for whom it does matter.

And that’s what angers AMDers. The big guy in the PC industry is saying, “There’s not enough of you to matter to us, not enough numbers or profit for the fuss and expense it would cost us to get your business.”

Even worse, the sales figures prove them correct.

And since at least AMDroids internalize their loyalty, it gets personal, to them, Dell is saying, “You are too small to matter to us,” which is even more infuriating.

The final insult is that should the world turn and some day all of a sudden 30% or 40% or 50% of average PC users suddenly demand AMD chips; Dell won’t fight, they’ll switch, and then proceed to mop up that market, too.

Nothing personal; it’s just business, the way it used to be.

Ed