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.
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.