ENGINEERING

Dell said yesterday that Q1 net income fell 18 percent, as it struggled with fierce competition from rivals who have gained ground on the company's direct-sales model. Dell earned $762 million, or 33 cents a share, falling 5 cents a share below estimates. A year ago, Dell earned $934 million, or 37 cents a share. Sales in the most recent period rose 6 percent, to $14.22 billion. While Dell had already taken some of the wind out of its report when it issued its earnings warning more than a week ago, the company surprised Wall Street when Rollins said the company would begin using AMD's Opteron chips in some of its high-end servers by the end of year. The decision, which ended Dell's longtime exclusive relationship with top chipmaker Intel, was enough to send AMD shares up as much as 15% in after-hours trading. Analysts were quick to note the significance of AMD could have on Dell's product, and bottom lines, and on Intel, whose shares fell almost 5% on the news. Dell's plans to use AMD chips is a major blow to the already weakened Intel. AMD will enable Dell to compete more aggressively in the server market. "The competitive environment has been more intense than we had planned for or understood," said Chief Executive Kevin Rollins. Dell, which grew into a Wall Street darling selling computers directly to businesses and consumers, said it no longer would issue quarterly guidance and instead would focus on specific long-term company and industry factors influencing performance. The report came out after the close of trading. The shift is "a victory not only for AMD, but for Charlie Browns everywhere," said Nathan Brookwood, head of chip industry consultant Insight64, referring to the popular U.S. comic strip character who could never catch a break. "This might suggest that Dell has concluded AMD might have a better solution even after Intel launches its next generation" of chips, Brookwood added. Intel, struggling to regain market share and kick-start profit growth, is overhauling its product lineup this year, promising chips that use less electricity while delivering faster performance. Intel spokesman Chuck Mulloy said the company would "support Dell and its customers so that they need and want Intel platforms." Douglas Freedman, a semiconductor analyst with American Technology Research, said the development wouldn't be a big blow to Intel as long as its new products live up to expectations.