Michael Dell is in China today. And announced his brave new initiative. A low cost PC for the China market (what a unique idea!):
http://news.digitaltrends.com/article12517.html
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/03/21/financial/f125540D90.DTL
The reason I'm underwhelmed is Dell's revenue slide began early last year when they over-emphasized low end systems which crashed their margins. So...while chasing the China market is ok, it needs to be only a small part of Michael Dell's strategy to re-vitalize the company and win market/revenue share back from HP.
What is surprising is they've chosen to go with Intel Celeron CPUs and not AMD. Yowsa...they must be getting a fantastic deal from Intel on this. Which may be part of the price Intel is paying to get back other SKUs from Dell. Alternatively, Michael Dell has returned and brought with him the tenets on which he built his multi-billion $ business. One of which was a blind partnership with Intel.
I'm not saying this is good...or bad for either Intel or AMD. But I am surprised that while AMD is suffering inventory problems because their OEM customers cancelled late at the end of Q4, yet their biggest/newest customer chose to go Intel on a low cost system. Something ain't right here folks...
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8 comments:
It's simple: Celeron based PCs are considerably cheaper than Athlon/Sempron based ones.
I disagree that it is all about price. The Chinese (and Taiwanese) are very, very brand conscious and will likely pay a premium to get the Intel brand. In the early days of the P4, sales were lackluster inside the US/elsewhere but blockbuster in China where people wanted to pay for the namebrand.
http://www.tgdaily.com/2007/03/05/amd-quad_core/
Don't worry, AMD will be cured of inventory problems by late summer!
How about this:
Celerons are cheap enough already. Dell can't battle too much on price. But Intel needs to keep fabs fully utilized. So they unload them on Dell.
Wow, this is really pointless. China is an extremely high volume market. Dell needs lots and lots of cheap processors. While AMD is the best bang/buck on the low end, Intel has far more volume, and can service what Dell needs from this market.
I have to agree with Greg's thoughts on volume. Without trying to say that the PC is a commodity, it is clear that the answer to making money in the chip sector isn't based on price per unit so much as it is on number of units shipped.
Since a there isn't much money to be made (read ASP per unit) for Celeron, I would speculate that Intel wouldn't have to give Dell a steep discount because Dell will be making small margins on a huge number of systems sold (read volume).
The big win (if you want to call it that) is probably the fact that Celeron isn't a leading edge processor. I'm speculating, of course, but my money is that Intel will be stuffing Dell's demand from 8 inch Fabs on 90nm process where Celeron was made when it was a 'new' technology. No re-tooling. No new facility. Brilliant!
http://www.fudzilla.com/index.php?option=com_content&task=view&id=270&Itemid=1
Great news, AMD decides to not further melt our glaciers, polar bears ftw!
I’ve always thought Dell’s problems are two-fold. Their market share erosion is driven by a combination of a resurging HP and the bad reputation for Dell’s post-sales services. Research has shown that HP has better return-customers over Dell and it’s quite obvious that this has started to play out.
Dell’s financial problem is due to the significant reduction of the Intel rebates under the tight scrutiny of the AMD lawsuit.
AMD’s Q4 inventory issue is brought about by Dell cancelled order. You can say maybe it’s due to poor demand for AMD based systems. I would like to say it’s due to Dell’s retaliation for screwing up their sweet deal with Intel. Regardless, Intel comes out on top and this should silence everyone who thought that it was Dell who had Intel on a leash.
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