For Intel, a fine line between competition and thuggery
On the day of his company’s big Barcelona server launch, Advanced Micro Devices (AMD) CEO Hector Ruiz was just about to leave a low-key gathering of bloggers when someone asked him about AMD’s legal battle with Intel (INTC).
| VIDEO: FIGHTING WORDS |
| Click video above to play: AMD CEO Hector Ruiz talks about Intel. |
The question struck a nerve. Ruiz said he’s confident that courts will find that Intel has been fighting dirty in the semiconductor market, effectively hitting AMD below the belt to keep it from gaining market share. “We deserve a bigger share than we have,” Ruiz said. “This thing ought to result in their behavior stopping. … The moment it does, I believe we're going to have the opportunity to significantly increase our participation in the market. It's inevitable.”
Apparently, Ruiz isn’t alone in that opinion. This week South Korean regulators told Intel that their two-year investigation concludes that the chip giant indeed has been sucker-punching AMD. Intel’s tactics have allegedly included paying computer makers to limit their use of AMD chips, and even selling chips at a loss to lock AMD out of major contracts. Regulators in Japan and the European Union have already brought similar accusations against Intel; Intel has said it will fight all of the charges.
ULTIMATE FIGHTING
Intel argues that the chip business is more akin to the no-holds-barred world of Ultimate Fighting than to genteel boxing. “We're hopeful that we'll be able to show the commission that the microprocessor market is functioning normally,” Intel spokesman Chuck Mulloy told the Associated Press. “This is an extremely competitive market and our conduct has been pro-competition and beneficial to consumers.”
Will Intel’s argument be successful? That could depend on whether courts view the company as an aging champion or a schoolyard bully.
CHAMP OR BULLY?
To mount its aging champion defense, Intel is likely to cast AMD as a worthy competitor that scored a coup four years ago with the release of its Opteron processors. Opteron, which obviously outperformed Intel’s offerings, sent AMD’s stock on a tear – between early 2003 and early 2006, AMD rocketed from the $5 a share range to a high of $40 a share, piling up profits along the way. The company also took market share from Intel, particularly in desktops and servers – even longtime Intel devotee Dell (DELL) is using more AMD chips.
But AMD will want the courts to focus on the last 18 months, which have been far less kind to AMD. Intel, which commands about 75 percent of the chip market, has slashed prices and improved its product portfolio. Meanwhile, AMD profits have evaporated and its stock has plummeted. Today AMD’s market capitalization is just a third of its early 2006 peak – a problem Ruiz would say is largely a result of Intel’s thuggery.
Is it really Intel’s fault, though? Intel supporters might point to the wars between Coca-Cola (KO) and PepsiCo (PEP), in which the companies routinely pay restaurants to sell their beverages exclusively. Intel’s tactics with PC makers could be seen as similar.
SILICON VALLEY SUPPORT
But Intel’s critics could just as easily point to Microsoft (MSFT), which ran afoul of regulators by tying its Internet Explorer Web browser and other programs into its dominant Windows operating system. In that case, critics successfully argued that Microsoft used Windows to pound its software competitors into the dirt. Even though Microsoft helped to make Web browsers ubiquitous by freely giving consumers software they would have otherwise paid for, courts found that those methods choked off competitors and ultimately limited customer choice.
Still, Intel bashers might have a harder time making their case. Redmond, Wash.-based Microsoft was widely reviled in the online startup community for its cutthroat ways, and its legal woes often seemed to pit it up against all of Silicon Valley. Intel, by contrast, has a less polarizing reputation. Apple (AAPL), a Valley darling, recently embraced the chip giant as the sole supplier of CPUs for its computers; and partners such as Hewlett-Packard (HPQ) and Fujitsu have praised the company’s power-saving mobile processors.
In the end, courts around the globe will decide whether or not Intel has been fighting fair. Though South Korean regulators are the latest to bring charges against Intel, they might move forward quickly; the Yonhap news agency reported that next steps could come as soon as next month. Japan and Europe are also continuing their legal process. And AMD has brought its own suit against Intel in the United States; it’s scheduled to go to court in 2009.
Ok, ok, ok
Look, remember back to the early nineties or so after years of court wrangling AMD finally won the 32-bit code against Intel. Before the court decision, Intel had built up a sizable cash hoard while AMD had been unable to make 32 bit chips to compete with Intel. That was 386 chips that is the first 32 bit chips way before the first Pentiums that overtook the world. AMD fell behind Intel so badly because of the court fights. Ever since, AMD had been playing catch up with Intel. Not to mention Intel's ability to dump chips all over AMD any time it wishes to, AMD had to resort to end runs like Opterons and now with graphic integrated chips which Intel will have none in the foreseeable future. Do not get me confused.. yeah, Intel already had integrated graphics only on its own motherboards with separate chips which is old news. AMD is now talking about fusing ATI circuitry into Athlons and Opterons without the need for separate graphics cards or integrated graphics chips on motherboards. This is what is exciting for AMD in the coming future. Intel has Centrinos which AMD has none in comparison. Centrinos allows you to use WiFi without having to add anything to the mother boards. Wi fi is not hot anymore as Intel moves up to Wimax now. Intel and AMD is now on different paths with increasingly distinct products of each's own. That is good but I think AMD still has a case on Intel chip dumping lawsuits. It can mean billions for AMD if AMD wins. I am not going to wait for it to happen. I am now focused with AMD's mergings with ATI operations to enhance graphics opportunities for AMD which may be hard for Intel to beat now. Who knows as circuits keep on shrinking that either will start putting RAM into x86 chips or other periphals like TV (HDTV tuning, sound, ethernet, security, etc) Anybody who says AMD is dead is as clueless as Warren Buffet about the microprocessor industry.
Of course Intel is a bully. They are incapable of competing pure and simple and they don't want to compete either which is clearly evident from all of their truly childish to lunatic antics. They should just shut the hell up and compete with AMD if they think they are even capable of competing. I laugh the hardest when some huge ass company baby cries and complains how their competitor is practicing in some anti-trust nonsense when all they did was produce a great product and decided to sell it cheaper than their competition is. That's anti-trust? Oh ok… then I suppose we should all respect bullies, kings, and monopolies who huddle together to gouge consumers with sub-par products produced by a bunch of asskissing monopolies? Is this what Intel has become? A crybaby unwilling and incapable of competing with a piss poor chip manufacturer of the world. Remember, this is the view of Intel not mine. Intel always thought of themselves superior. They aren't superior; they are damn cry babies. wah… wah… AMD is selling their stuff way too cheap… wah… wah… call our lawyers. wah…
It is AMD that has been selling products below cost. That is why they have lost over a billion dollars in the last year. Intel is so much more efficient that they could drive AMD out of business on price and still make a profit.