Dell Inc late Thursday said it would begin using chips from Advanced Micro Devices Inc, sending shares of both companies higher. Shares of AMD rose surged more than 13 percent.
Dell's stock rose more than 4 percent and Intel Corp, AMD's far larger rival and Dell's only chip supplier for the past 22 years, fell more than 5 percent.
Dell, which posted an 18 percent 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 in some of its high-end corporate server machines finally consummates a long-running on-again, off-again flirtation with AMD.
Dell said it plans to introduce multiprocessor server computers using Opteron chips by the end of the year.
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 US comic strip character who could never catch a break.
Santa Clara, California-based Intel, struggling to regain market share and kick-start profit growth, is overhauling its product line-up 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.
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.
Round Rock, Texas-based Dell 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 it would no longer give 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."
That would result in revenue growth of about 6 percent from $13.4 billion in Dell's second fiscal quarter a year earlier.
For the current quarter, analysts expect Dell to earn 34 cents before items, on average, on revenue of $14.4 billion.