Intel, AMD, And Reseller Success: A System Builder Weighs In

Features
By Jon Bach, Puget Systems, Bestofmedia Team
published

Change Is In The Air?

Good Friday evening, everyone. Chris Angelini here. Earlier in the week I exchanged emails with Jon Bach, president of Puget Systems, who had something to say about the recent EU ruling against Intel.

Having gone from the hardware enthusiast world to the channel world and back to the enthusiast world here at Tom's Hardware, much of what he said resonated with me. I won't steal any of his thunder, but I present the following column to you for discussion over the weekend.

System builders, feel free to chime in with your own thoughts. I know for a fact that Intel puts a lot of effort into its channel efforts, helping small system builders who would otherwise not be able to compete against the tier-ones do just that through programs like ESAA, Cluster-Ready, and Mobile Authorized Integrator, whereby it's possible to build your own notebooks, servers, and desktops on the shoulders of a grander effort. What is AMD doing to make its own products as attractive in the channel? What's the company doing to help SIs get AMD technology into notebooks? How is it leveraging the strength of its Dragon platform to help resellers build better machines?

But I'm getting ahead of myself here. Take it away, Jon.

Introduction

Last week, the European Union fined Intel a record $1.45 billion dollars, citing abuse of its dominant position in the market by giving rebates to computer manufacturers in exchange for exclusive use of Intel CPUs. While AMD celebrated the victory by showing the EU flag on its home page (Ed.: it has since been taken down), Intel is talking of plans to appeal.

We're left to wonder what this ruling will change in the industry. Will it strengthen AMD's market share with system builders and enthusiasts? As the president of Puget Systems, a boutique system builder in Seattle, WA, I'm not here to talk about the merits of competition, or what rebates are/are not ethical for Intel to offer. I'm here to talk about system builders, and why we use Intel CPUs so heavily.

Of course, smaller system builders have not received any payments from Intel to exclusively sell Intel CPUs. This is about sales volume, and that battle is going to be fought with the big OEMs. Even so, I should start by making it clear that even smaller system builders do have incentives to sell Intel products today. Intel has a channel partner program that awards marketing dollars for every Intel purchase. AMD, to my knowledge, does not. If they do, I don't know about it, and that would be an entirely different kind of marketing failure. Either way, I am surprised at how many people have confused these rebates with those the EU is fining Intel over. Rebates for sales volume are common in the industry. Paying companies to not use your competitors' products is where you cross the line to unethical.

But even these legal rebates are not why many system builders focus on Intel CPUs. In fact, in the case of Puget, we have buckets and buckets of these marketing dollars saved up because we haven't gotten around to spending them. With a limited amount of time, and countless other things to do, we just generally focus on the product first and advertising second. So why, then, did Intel receive 93.5% of our CPU sales in 2008? This number is quite typical with system builders. The way I see it, there are three major reasons:

1) Customers are not asking for AMD CPUs

I'm not talking about which CPU is faster, or which has better value. I'm talking about customer demand, which is a large part of shaping a system builder's product line. If we focused on the value segment, as some builders do, I'm sure we'd see more demand for AMD CPUs. As a boutique outfit that focuses primarily on high-performance, highly reliable computers, we simply see larger demand for Intel CPUs. We have always listed both brands; AMD just isn't selling. Could we do a better job keeping up to date with AMD's product line or with giving them exposure on our Web site? Absolutely. And if our customers wanted it, we would. If customers are asking for AMD product, there isn't a system builder out there that will turn down sales in exchange for Intel rebates.

I will say that server CPUs are an exception. AMD has done an excellent job of making its server line more "approachable" than Intel. Whereas Xeon MP processors are incredibly expensive (and are not as readily available in the channel), AMD has made it easy for system builders
to provide dual- and quad-socket servers and workstations.

Jon Bach, Puget Systems
110 Comments Comment from the forums
  • SpadeM
    Notice that at no point in this column did I talk about performance of AMD versus Intel.
    Nope, no you didn't say anything about performance. But if I were to read lines of this statement:
    If we focused on the value segment, as some builders do, I'm sure we'd see more demand for AMD CPUs. As a boutique outfit that focuses primarily on high-performance, highly reliable computers, we simply see larger demand for Intel CPUs.

    I'd come to believe that: AMD = great value but not reliable or a high performance part; Intel = not a great value but it's high performance and reliable.

    That aside, AMD has a weak marketing strategy because it's the smaller company of the two listed here, so I'd expect Intel to send a footman along with it's processors to system builders.

    All in all I don't quite understand the point of this "article", I mean the man himself said things that we already know about Intel vs. fair competition so ... what's to learn from this piece?
    Reply
  • bucifer
    Was this some kind of advertising for Intel? Of course they sell more CPUs to system builders because AMD had no competitive product for a couple of years and when it finally did Intel made sure it would not sell, by offering rebates for rejecting or delaying similar AMD systems.

    This is why EU fined Intel in the first place. AMD never had a chance to get back in the game. It's like playing poker with 1000$ against someone with 1$ million. It kind of hard to get up.

    You keep repeating that AMD should connect better with system builders but you fail to see that the system builders themselves did not connect by accepting the rebates from Intel for delaying or denying AMD products.

    I do agree that AMD needs to be more competitive, hopefully it will soon be and we won't see 1000$ CPUs anymore.
    Reply
  • DarkMantle
    I have read this site for a long time but this is my first comment, after reading this article and thinking that there is some truth in what Jon Bach say, i also went to his site pugetsystems.com and made an AMD built and then compared it to a newegg amd built and after comparing the 2 of them i realise why his site fails at selling amd computers.

    pugetsystems.com

    Asus M4A79-T Deluxe DDR3
    AMD Phenom II X4 940 125W AM3
    Kingston Value 4GB DDR3-1333 (2x2GB)
    ATI Radeon HD 4850 1GB
    Western Digital Caviar Black SATA2 640GB QUIET
    Pioneer 20x DVD-RW SATA (black)
    Antec Nine Hundred
    Corsair TX 650W
    Stock CPU Fan (AMD64)
    Standard Warranty: Lifetime Labor, 1 Year Parts

    System Price: $1,428.22


    newegg.com

    ASUS M4A79T Deluxe AM3 DDR3 AMD 790FX ATX AMD Motherboard
    AMD Phenom II X4 955 Black Edition Deneb 3.2GHz Socket AM3 125W
    Kingston ValueRAM 4GB (2 x 2GB) 240-Pin DDR3 SDRAM DDR3 1333
    SAPPHIRE 100258-1GHDMI Radeon HD 4850 1GB 256-bit GDDR3
    Western Digital Caviar Black WD6401AALS 640GB 7200 RPM SATA 3.0Gb
    Pioneer 20X CD/DVD Burner Black SATA
    Antec Nine Hundred Black Steel ATX Mid Tower Computer Case
    CORSAIR CMPSU-650TX 650W ATX12V / EPS12V SLI Ready CrossFire Ready 80 PLUS

    Subtotal: $914.43 (with rebates), 1059.93 (no rebates)

    Not only was i surpriced by the lack of options, but also by the huge plus his company charge on a computer, when you buy AMD you are probably looking for a good but cheap solution, but for the price he is charging i rather go buy an Intel computer on newegg.
    Reply
  • curnel_D
    DarkMantleI have read this site for a long time but this is my first comment, after reading this article and thinking that there is some truth in what Jon Bach say, i also went to his site pugetsystems.com and made an AMD built and then compared it to a newegg amd built and after comparing the 2 of them i realise why his site fails at selling amd computers.pugetsystems.comAsus M4A79-T Deluxe DDR3AMD Phenom II X4 940 125W AM3Kingston Value 4GB DDR3-1333 (2x2GB)ATI Radeon HD 4850 1GBWestern Digital Caviar Black SATA2 640GB QUIETPioneer 20x DVD-RW SATA (black)Antec Nine HundredCorsair TX 650WStock CPU Fan (AMD64)Standard Warranty: Lifetime Labor, 1 Year Parts System Price: $1,428.22newegg.comASUS M4A79T Deluxe AM3 DDR3 AMD 790FX ATX AMD MotherboardAMD Phenom II X4 955 Black Edition Deneb 3.2GHz Socket AM3 125WKingston ValueRAM 4GB (2 x 2GB) 240-Pin DDR3 SDRAM DDR3 1333SAPPHIRE 100258-1GHDMI Radeon HD 4850 1GB 256-bit GDDR3Western Digital Caviar Black WD6401AALS 640GB 7200 RPM SATA 3.0GbPioneer 20X CD/DVD Burner Black SATAAntec Nine Hundred Black Steel ATX Mid Tower Computer CaseCORSAIR CMPSU-650TX 650W ATX12V / EPS12V SLI Ready CrossFire Ready 80 PLUSSubtotal: $914.43 (with rebates), 1059.93 (no rebates)Not only was i surpriced by the lack of options, but also by the huge plus his company charge on a computer, when you buy AMD you are probably looking for a good but cheap solution, but for the price he is charging i rather go buy an Intel computer on newegg.Every single computer manufacturer in existance sells at a markup. They're not running a distrobution, they're running a buisness reliant on sales profit. Infact, without rebates, the less that 400 dollars with a LIFETIME labor warranty means they're actually pulling a much smaller margin compared to competing High end system builders.
    Not only that, but the intel machines will see the SAME exact percentage markup.

    Should have reserved your first comment for something with more thought.
    Reply
  • bigdaddycool
    This entire article discusses nothing. It's someone's opinion and that is all.

    From what I read the entire sole backing factor of this is that the LGA775 socket has the locking cover over the CPU which means they dont come loose during transit.

    Are you kidding me? That may be a GREAT feature, but how about the stupid 775 actual heatsinks? .... the four clips that go directly into the board and unless done properly can bend it etc.

    Compare. AMD: Yes no clippable cover over the cpu but better heatsink mount then Intel. = Should not come loose during transit. Intel has no pins, AMD has pins (again makes the connection longer into the socket).

    Moving onto performance, since when are AMD unreliable? ... Socket A series? ...... By todays market standard both are equal. Power vs Performance, AMD uses usually less then Intel, Intel uses slightly more but also had a bit more performance. Therefore both cpu's are fairly balanced.

    Where I work, we built computers according to customers requirements. We actually used to sell 95% Intel, after 3 years we are now selling about 60% AMD, 40% INTEL. Intels are better for heavy duty stuff like video encoding, autocad etc. AMD's are better for everyday usage and for the price on the X2 6000 series, you cant beat the performance vs price factor for 90% of customers.

    Now look at the i7's ..... they cain in peformance but also fail at scaling in game resolutions. AMD Phenom II, not as fast..... but faster in other ways.

    Intel got fined because "they have money" .... they have "money" .... and thus can employee more people, give more away, charge more money.... they are a big company, with alot of market power. The point the EU's fine wasn't anything to do with AMD other then there were one of the complaining parties.

    It's about how they used 'unhanded' tactics to deal with big business.

    As for all the System Builders out there who winge at AMD and back Intel for their various reasons saying how Intel offers this and AMD doesn't.

    1. Any company you turn your back on cannot help you
    2. If everyone ignores AMD products are available how is AMD ever going to make enough money to make courtosy calls to resellers? give promossions etc.
    3. OLD FUDDY DUDDIES/KNOW IT ALLS. So stuck in your ways you cannot take a step back and validate a product for what it can actually do.

    ***

    To top off this discussion. The entire article comparing reasons to use Intel and not AMD is actually pointless.

    Reliability. Motherboards, Ram, Hard Drive, CDROM's, PSU are 99.9% more likely to go long before a CPU.

    More examples:

    1. ASUS P4S800MX, P4 3.0Ghz overtaxed the mobo, dead.
    2. Use of seagate hdd's, fail. (.7 faster, .7 going to fail quicker)
    3. Norton (any version) .... does it matter what CPU you have?
    4. AMD Packaging vs Intel ? ... No difference.
    5. Intel's FAN vs AMD's FAN = No difference.
    6. Power consumption = virtually the same.
    7. Performance Differences = Both CPU's offer surpreme performance each in their own area's over their competition cpu's.
    8. Price. E8400 or X2 6000+. Performance vs Value = AMD

    ****

    At the end of the day, in my sole opinion. It's about what your customers require....

    Once upon a time my boss used to be embarrased to sell AMD. He was always of the opinion everyone knows Intel, they have TV Ads.

    Now he's neither here nor there. He's taken the approach of using us techs what to use for various applications. He realised the only problem that existed with selling AMD's wasn't AMD but his attitude towards their cpu's. We've found fewer problems with AMD setups with the 780G chipset compared to the Intel's with the G31, P31 & P45's etc.

    AMD offer a platform, cpu, video, chipset....

    Intels market share will fall either way, because their CPU's are too expensive for most.

    I personally own a Phenom II Quad 3Ghz, 8GB RAM, RAID etc... the other tech at work owns a i7 2.66 clocked to 3ghz, same sort of setup. There is virtually no difference other then he had to goto a expensive x58 mobo, ddr3 and buy a exp cpu.

    And compare his to mine, 780G chipset built for Blu-Ray, 12 usb ports. i have HDMI, DVI AND VGA on my mobo......

    The winner ultimately is AMD for CPU choice. You buy Intel only for bragging rights..... but it doesn't mean it's going to be faster for everyday usage.

    Sorry for the long post. Perhaps mine should of been the article huh.
    Reply
  • tacoslave
    i bought my phenom II system because i only had 900 dollars and it allowed me to get a wayyyyyy better set of graphics cards. other that that the difference in other tasks is only seconds and im not willing to pay a huge premium for seconds. and for some people 100 or 200 dollars is huge.
    Reply
  • IzzyCraft
    curnel_DEvery single computer manufacturer in existance sells at a markup. They're not running a distrobution, they're running a buisness reliant on sales profit. Infact, without rebates, the less that 400 dollars with a LIFETIME labor warranty means they're actually pulling a much smaller margin compared to competing High end system builders. Not only that, but the intel machines will see the SAME exact percentage markup. Should have reserved your first comment for something with more thought.Also he didn't get the exact same parts they are nice enough to list the model numbers and stats of just about every product they use.
    Reply
  • DarkMantle
    curnel_D - are you kidding? what kind of margin is that?, i can buy an i7 920 with pretty much the same components (except for the case and PSU) in HP web site with monitor of 23", Windows Vista, extended service plan, mouse and keyboard for 1543 bucks, yeah HP sucks but then again the comp is ready to work out of the box and is an Intel solution, only thing i'm saying is that with that kind of "margins" you will allways have a hard time selling an AMD solution.
    Reply
  • bigdaddycool
    DarkMantle. Typical comment. "I can get a HP". You get get a Dell too buddy. Premade systems use cheap parts hence the CHEAPER price. Doesn't really come down to Intel VS AMD does it? ... if you've got a seagate/maxtor hdd..... dodgy ram etc. Not to mention 90% of the Premades have bad case design.... hdd being vertical, big heatsink and lack of airflow.....

    tisk tisk. I wil make no further comments about this article.
    Reply
  • curnel_D
    DarkMantlecurnel_D - are you kidding? what kind of margin is that?, i can buy an i7 920 with pretty much the same components (except for the case and PSU) in HP web site with monitor of 23", Windows Vista, extended service plan, mouse and keyboard for 1543 bucks, yeah HP sucks but then again the comp is ready to work out of the box and is an Intel solution, only thing i'm saying is that with that kind of "margins" you will allways have a hard time selling an AMD solution.Aside from what you priced at bare min to pull out that i7, everyone knows that High end system builders do not compete with mainstream manufacturers. Infact, if you would have gone for HP's 'gaming' system over their mainstream system, we would have seen a drastically different picture.

    And that's not figuring in the fact that HP's have no possibility for overclocking. And that they're built on an assembly line and only customized after they get to your area by inexperienced temp workers working for something barely above min wage.

    It costs money to plan, professionally build, package and deliver a custom built enthusiest computer. Money that even hp will charge a whole lot extra for if you'd bothered to be unbiased.

    Lets face it, buying custom computers isnt for you. If you can built your own, then you'll always save a ton more money. But the people that cant arent going to visit newegg.com and expect to get custom built computers based on distro prices.

    You're bashing a single system builder for a practice that every single other system builder takes part in.

    So if you think you can offer high end pre-configured enthusiest level PC's for a few hundred dollars lower, then by all means, get it done. If you undercut every single boutique builder in the market, while still offering their level of quality and support, you'll obviously make a killing on that 30-50 dollar profit margin, wont you?
    Reply