Dell to use AMD chips, says profit slumps 18 p.c.

By Philipp Gollner

SAN FRANCISCO - Dell Inc. on Thursday said it would begin using chips from
Advanced Micro Devices Inc., sending shares of both companies higher.

Shares of AMD rose more than 13 per cent, shares of Dell rose 4 per cent and
shares of Intel Corp., AMD's far larger rival and Dell's only chip supplier
before the announcement, fell more than 5 per cent.

Dell, which posted an 18 per cent decline in quarterly profit, had been the
last major PC maker to use processors only from Intel, the world's largest chip
supplier. Dell's decision to use the Opteron microprocessor finally consummates
a long-running on-again, off-again flirtation with AMD.

Dell plans to introduce multiprocessor server computers using Opteron by the
end of the year, it said in a statement.

In its earnings report, Dell said net income declined to $762 million, or 33
cents per share, from $934 million, or 37 cents per share, a year earlier.
Revenue increased to $14.2 billion from $13.4 billion.

Analysts, on average, had forecast earnings per share of 33 cents and revenue
of $14.2 billion, according to Reuters Estimates. Analysts cut their estimates
after Dell last week said earnings were lower than the company's February
forecast as it cut prices to rekindle growth.

"It is not clear to us why more aggressive pricing will drive improved
profits going forward, as it clearly failed to do so in the back half of last
quarter," said Cindy Shaw, an analyst at Moors & Cabot.

Round Rock, Texas-based Dell, whose founder Michael Dell changed the computer
business by selling PCs directly to customers and bypassing retailers, has
stumbled in the past year as competitors including No. 2 PC maker
Hewlett-Packard Co. offered lower prices thanks to cheaper components and more
efficient manufacturing operations.

The company also said that it was ending its practice of giving specific
revenue and earnings per share forecasts, noting only that it does "expect
financial results for the second fiscal quarter of fiscal 2007 to be similar to
its first quarter results."

For the current quarter, analysts expect Dell to earn 34 cents before items,
on average, on revenue of $14.4 billion.

"The elimination of go-forward quarterly targets is an indication that
Dell's uncertainty about its business remains high," Goldman Sachs analyst
Laura Conigliaro wrote in a brief note to clients after Dell reported its
results.

Shares of Dell have plunged more than 40 per cent in the past year as the
company three times has missed revenue forecasts. Its stock trades at 16.8 times
expected 2006 earnings per share, about the same as Hewlett-Packard, whose stock
is up 44 per cent from a year ago.