Dell's then-chief operating officer (and later CEO) Kevin Rollins, after meeting with Intel negotiators to discuss that prospect, reported back internally that Intel was ready to do "whatever it takes" to keep Dell from purchasing from AMD. "Initial word is that our MOAP" -- the acronym stands for "Mother of All Programs," a term used to refer to Intel's massive quarterly rebate payments to Dell -- "should increase from the $70M this qtr to $100 mm."
More formally, the MOAP was known as the Meet Competition Program (MCP), but precisely how it was calculated and what it was for were things that weren't spelled out in any contract. A 2003 Dell internal document describes the MCP as a "'monogamy tax' for Intel," and explains: "There is not a formal contract per se that documents all the terms and conditions of the MCP program for a quarter. Rather, the MCP terms and conditions are agreed upon via email and telephone communications, and are finalized in a spreadsheet." One hundred million dollars per quarter, and no formal contract. Hmm.
Whatever these payments were for, they skyrocketed in size as Dell became increasingly tempted to stray from the Intel fold. The pressure to stray intensified after April 2003, when AMD introduced its Opteron chip for servers, which many customers saw as clearly superior to Intel's then offerings (as well as cheaper). Worse still, due to certain misplaced bets and calculations relating to its product "roadmap," Intel was not going to be able to offer a truly competitive server chip for a period of two to three years.
Dell considered switching to AMD, but its executives feared the "double whammy" of seeing a huge chunk of its rebates not only vanish, but shifted to a competing computer maker. By mid-2004, Intel was paying Dell about $300 million per quarter in rebates -- or more than one-third of its quarterly net income.
But Dell continued to lose share, revenue, and reputation by not shipping the Opteron. On November 4, 2005, then CEO Otellini reported back to colleagues on a call he had received from Michael Dell, Dell's then chairman: "[Michael Dell] opened by saying 'I am tired of losing business'... 'Dell is no longer seen as a thought leader.'" Later that month, Michael Dell emailed his own people writing, "We are losing the hearts, minds and wallets of our best customers."
But Otellini countered Michael Dell's complaints by, according to Otellini's email, reminding him, "We are transferring over $1 billion per year to Dell for [MCP] efforts. This was judged by your team to be more than sufficient to compensate for the competitive issues." When advised in February 2006 that Dell's then CEO Rollins had decided to stay with Intel chips, Otellini emailed a colleague calling Rollins "The best friend money can buy."
