Analyst: Dell likely to adopt AMD chips
update Dell likely will reverse course and begin selling computers with Advanced Micro Devices' processors, Piper Jaffray analyst Les Santiago predicted Tuesday, sending the chipmaker's stock up 4 percent in midday trading.
Context & Ripple Effects
Les Santiago's call lands after a bruising stretch for Dell: a third-quarter earnings decline reported in October 2005, cost cuts that included ending free home delivery on low-end machines in September, and customers airing complaints about long support hold times and damaged corporate orders. Against that backdrop, opening the door to AMD reads less like a technology bet than a margin-and-leverage move by a company hunting for savings.
Nothing here is settled — the prediction is one analyst's read, flagged as such — but the market treated it as consequential: AMD rose 4 percent in midday trading on the note alone, a measure of how much of the chipmaker's perceived upside sits in the one major account its chips have yet to reach.
First-order effects
- AMD gets an immediate valuation lift — the confirmed 4 percent midday gain — and, if Santiago proves right, a first foothold in Dell's lineup, reversing the 'reverse course' status quo where Dell's machines carried no AMD processors at all.
- Dell, still absorbing its third-quarter earnings decline and cost measures like the end of free delivery, would gain a second processor supplier and fresh bargaining leverage over Intel, whose favoritism toward HD DVD Dell and HP already publicly rebutted back in September 2005.
Second-order effects
- Losing sole-supplier status at Dell would force Intel to compete for volume it has taken for granted, shifting negotiating power toward the PC maker on pricing and terms.
- A Dell validation would narrow the differentiation that other system builders get from offering AMD while Dell does not, pressuring the wider OEM field to treat dual-sourcing as table stakes rather than a positioning choice.
Third-order effects
- If the pattern holds, exclusive processor allegiances give way to dual-sourced supply as standard PC-industry practice, structurally eroding the single-vendor lock-in that has shaped x86 economics.
- The episode also confirms that supply-relationship speculation is now a priced input: a single analyst note moved AMD 4 percent before any deal existed, raising the stakes for how chipmakers and OEMs manage what they confirm publicly.
The trend: The PC industry is drifting from single-vendor processor lock-ins toward dual-sourced component strategies, and each step in that direction re-prices AMD around the accounts it has yet to win.