Dell Shifts its AMD Systems to Retail Sales

Dell has scaled back the range of consumer PCs with processors from Advanced Micro Devices that it sells on its Web site, focussing almost exclusively on systems with Intel processors.

Dell's entire line of AMD-based laptops for consumers, as well as most of its AMD-based consumer desktops, will now be sold only through Dell's 10,000 retail outlets worldwide, said Dell spokeswoman Anne Camden.

Except for one desktop, the Inspiron 531, which includes the AMD Athlon 64 X2 Dual-Core 4000+ processor, Dell will focus its online consumer sales on Intel-based PCs. For businesses, Dell will continue to sell a range of AMD-based systems online.

The decision, made this week, could be a setback for AMD. The Intel rival received a big boost in 2006 when Dell began offering its chips in desktops, laptops and servers.

AMD-based systems tend to be priced lower than Intel-based systems, so it makes sense for Dell to ship AMD products through retail channels, said Dean McCarron, founder and principal at Mercury Research.

"[Dell's decision] is not that surprising given that AMD's primary strength is the consumer retail channel," he said. Price points on PCs tend to be lower in the retail market, and retail buyers are more sensitive to cost than online buyers, McCarron said.

AMD said the move was part of a strategy to offer a wider range of AMD-based PCs through retail channels. "We are always evaluating product offerings and how customers can access them," Camden said.

Not many consumers buy systems based on the processor type, she said, and few distinguish between AMD and Intel processors. Users select PCs based mostly on price and what they will use them for, such as surfing the Web or playing music and videos, she said.

Dell has expanded its in-store offerings over the past six months by signing up more retailers, including Best Buy and Wal-Mart in the U.S., Tesco in the U.K. and Bic Camera in Japan.

The retail strategy helped the company expand its lead over Hewlett-Packard as the largest U.S. PC vendor in the fourth quarter of 2007, according to IDC. However, HP remained the world's largest PC dealer, topping Dell, Acer and Lenovo, IDC said.

Hewlett-Packard already offers more AMD-based PCs in retail than online, so Dell's decision isn't a first, McCarron said. Until it won over top-tier PC vendors several years ago, AMD relied on the retail market and white-box vendors for its chip sales.

The effect of Dell's strategy shift on AMD remains to be seen, McCarron said. It is a large and important PC vendor, but it is also a relatively new partner for AMD.

AMD has suffered some setbacks recently, reporting five straight quarterly losses and delaying shipments of some new desktop and server processors. Its market share was 23 percent in the fourth quarter of 2007, down a fraction from the year before, while Intel's market share climbed slightly to 77 percent, according to IDC.