Ditching AMD is just business for Schwartz

Intel’s leverage has less to do with its charismatic leader than with the vendor’s pricing strategy

If nothing else, Intel's reversal of AMD's exclusive contract to supply CPUs to Sun Microsystems shows just how far some CEOs are willing to go on the first date.

The story goes that Sun CEO Jonathan Schwartz gave Intel CEO Paul Otellini a ring. They went out, knocked back a couple of beers and, by night's end, they had sealed the deal.

That's twice now that Otellini has been credited with securing a major supply win by chatting up a fellow CEO. Apple CEO Steve Jobs was reportedly wooed by Intel's CEO, as well. In both cases, Intel's PR machine was quick to note that Intel was invited to the table, perhaps in an effort to avoid speculation about what Intel did to close these deals.

Still, Sun's decision to break its exclusive supply deal with AMD isn't as precipitous as the press made it seem. Following the appointment of Schwartz as Sun's CEO, the company's rhetoric regarding the uniqueness and superiority of AMD technology was dialed down. Cooperative marketing trumpeting the AMD/Sun partnership had faded away before Otellini supposedly worked his magic. And when Sun announced its recent return to profitability, AMD and Opteron were given little credit.

When Schwartz swept into office, he laid the AMD arrangement on the table along with everything else that Sun held dear. It was an effort to shake up Sun's customers, competitors, employees, and, most importantly, its shareholders. Portions of Sparc, Java, and Solaris are already apparently free for the taking (with some strings), and now Sun has sacrificed its marquee position as the only first-tier system maker with the vision to bet its x86 strategy on AMD. Banking on AMD showed nerve and foresight, but five years from now, the same might be said of bringing Intel back into the fold as a supplier. Sticking with AMD would have put Sun at risk of having its least expensive Opteron servers priced higher than competitors' Core microarchitecture Xeon.

In a blog entry, Schwartz said that jointly developed Xeon workstations and servers will augment Sun's Sparc and AMD platforms. The two companies will also collaborate on engineering larger, multisocket systems, optimized for Solaris and Java, with best-of-breed virtualization and performance technologies from each firm.

Ultimately, Intel's leverage has less to do with its charismatic leader than with the vendor's strategy to undercut its competitor's pricing and be a one-stop, high-volume supplier.

In the end, Schwartz understands that Sun's buyers, observers, and, certainly, its board don't care what's inside the boxes sold by Sun's sales force.

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Tom Yager

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