The trials of Intel

The trials of Intel
Spotlight falls on Intel as it attempts to defend itself against allegations of illegal business activities. Tom Foremski The US government opens its anti-trust trial of Intel this week, trying to prove that the chip giant engaged in illegal business activities. Just as the US government’s anti-trust trial of Intel partner Microsoft moves into a six-week recess, attention now falls on Intel, the other partner in what some describe as the ‘Wintel’ duopoly. But while the anti-trust case against Microsoft might be easier to prove, Intel poses a greater challenge since the company can show it is losing market share to its competitors. As with the Microsoft trial, the Federal Trade Commission (FTC) is expected to produce potentially damaging e-mail evidence between Intel executives regarding pressure applied to other companies in prior legal disputes. The FTC and Intel recently revealed their 50-strong witness list which include top executives at Intel, DEC, Advanced Micro Devices (AMD) and several expert witnesses. The FTC complaint centres on Intel’s business dealings with three companies: DEC, now part of Compaq Computer; Intergraph which builds Intel-based workstations; and Compaq Computer. The FTC says that Intel used its position as the dominant microprocessor supplier to coerce these companies into giving up intellectual property (IP) rights by refusing to provide vital data on its future processor designs. Intel, for example, cut DEC off from such information during a major dispute over processor patents. And Intergraph alleges that Intel tried a similar technique to force it to give up IP related to workstation cache technologies. Intergraph has a separate anti-trust suit in progress against Intel. In recent weeks, both sides have taken steps to bolster their cause. Intel tried to have FTC lead lawyer Richard Parker dismissed, claiming that his links to AMD in a previous legal dispute should disqualify him. Not only did Intel lose that round but it was also forced to turn over pricing information to the FTC. In the days leading up to the trial’s start, Intel filed a pre-trial brief claiming that the FTC has not been able to show that Intel has harmed its microprocessor competitors and calling the FTC complaint “bizarre”. Intel lawyers added that the FTC anti-trust complaint was an “AMD-manufactured claim” with no merit and that it was acting in accordance with the wishes of Intel competitors rather than in the interest of the US PC consumer. The FTC, in its pre-trial brief, claims that “the evidence will show that the ability of Intel to force licences to the technology it desires will, over time, dull the incentive of other firms to innovate”. Intel has also accused the FTC of trying to shift the focus of the trial from looking at the microprocessor market to an investigations of how Intel’s dominance in key areas such as chipsets and motherboards has affected Intel’s competitors. Intel, for example, has only just recently began licensing its P6 bus technology to other chipset makers. The key point of defence for Intel will be to show how competitor AMD, and to a lesser extent Cyrix, has gained market share at the expense of Intel. The FTC counters, however, that it does not believe that AMD and Cyrix can maintain their momentum, pointing out that Intel recently made “aggressive steps to capture the new segment and is widely expected to dramatically gain share in the low-end segments”. And winning the market share battle in terms of units shipped is not the same as competing effectively. AMD is forced to guarantee a 25 per cent discount to Intel prices and it has warned that it may report a loss for its current fiscal quarter because of fierce price cuts by Intel.


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