Business Tech

Intel's share of the global CPU market hit a four-year high in the second quarter of 2009, says a report released Monday by market researcher iSuppli.

Thanks to a slight uptick in PC sales, Intel captured 80.6 percent of microprocessor revenue worldwide, growing from 79.1 percent in the first quarter of the year and 79.2 percent in the second quarter of 2008. This is the largest slice of the market Intel's had since its 82.4 percent share in 2005.

The gain in Intel's market share came at the expense of AMD, which saw its share sink to 11.5 percent from 12.8 percent in the first quarter and 11.9 percent in the year-ago quarter.

(Credit: iSuppli)

"Intel benefited as the global PC market took a first small step toward recovery in the second quarter," said Matthew Wilkins, principal analyst of compute platforms for iSuppli. "AMD didn't benefit from the small sequential rise in PC sales because its average microprocessor pricing was lower than that from the first quarter."

Intel saw gains in its CPU market share across all segments, including desktops, notebooks, and servers. But the notebook sector was the only one to grow, climbing 13 percent over the second quarter of 2008. Both the desktop and server segments declined year over year.

The sluggish economy still took its toll. Overall, CPU sales shrunk for both Intel and AMD, since shipments were down from a year ago.

Helped by demand for Intel's Atom chip, microprocessor shipments shot up 10.1 percent in the second quarter of the year, according to research released Thursday by market firm IDC.

The second-quarter gain from the first quarter compared with a drop of 10.9 percent from the fourth quarter of 2008 to first quarter of 2009. However, the year-over-year comparison with 2008's second quarter showed a drop of 7 percent.

The growth from the first quarter of 2009 to the second quarter was driven largely by manufacturers replenishing their chip inventory, rather than any boost in consumer demand for PCs, said IDC.

The Atom processor also played a role. Second-quarter 2009 shipments of Atom, which has found a home in Netbook PCs, grew 24 percent over the first quarter. The chip accounted for around 25 percent of Intel's processor shipments and 8.1 percent of the company's mobile processor sales in the quarter, estimated IDC.

Overall, Intel's second-quarter PC processor shipments jumped 12.5 percent over the first quarter, while AMD's inched up 1.8 percent for the same period.

"The percentage of Intel's revenue earned in Asia/Pacific grew from 51% in 1Q09 to 55% in 2Q09," Shane Rau, director of Semiconductors: Personal Computing research at IDC, noted in a statement. "This fact, combined with the significant sequential 'snap-back' rise in Intel's overall processor shipments--particularly Atom shipments--while AMD's overall shipments were about flat, indicate that the PC processor market didn't recover in 2Q09."

Overall market revenue rose 7.9 percent from the first quarter of 2009 to the second, but second-quarter revenue was down 15.3 percent compared with the year-ago quarter.

With the Atom chip and inventory refresh driving second-quarter growth, the processor business is still weak, said IDC. And a definitive recovery is not yet in sight.

"Going forward, IDC believes that (original design manufacturers) and (original equipment manufacturers) have balanced out their inventories and so we can't rely on inventory replenishment to drive market improvements," said Rau. "Instead, we can only rely on what actual end demand really is, and that means we have to be cautious not to be over-exuberant that, say, the traditional back-to-school PC buying season will materialize into a bullish second half. It won't."

Update at 1:50 p.m. PST, with information from American Guarantee's lawsuit against Intel in the Delaware Chancery Court.

Intel has filed a $50 million lawsuit against insurance carrier American Guarantee and Liability Insurance, alleging breach of contract.

The alleged breach involves the insurance firm's failure to pay for Intel's legal defense related to antitrust lawsuits filed by rival Advanced Micro Devices and consumers.

Intel, in the lawsuit filed last week in the U.S. District Court for Northern California, alleges that American Guarantee did not step up to the plate and begin paying for the chip giant's legal costs after it had exhausted $66 million in insurance policies provided by two other insurance carriers. (To read the entire lawsuit, click here for a PDF.)

Click on the image for a PDF of the entire lawsuit.

(Credit: Intel)

The chipmaker, which holds a $50 million policy with American Guarantee, purchased several layers of comprehensive liability insurance from a variety of insurance companies from April 2001 through April 2002. Beginning in mid-2005, chip rival Advanced Micro Devices and consumers filed lawsuits against Intel, alleging that the chipmaker engaged in anticompetitive conduct and unfair business practices in the sale, promotion, and marketing of its microprocessors.

According to Intel's lawsuit, Old Republic Insurance provided $16 million in comprehensive liability insurance as the first line of defense, and XL Insurance America provided a second layer of $50 million in coverage under a commercial umbrella policy.

American Guarantee, Intel alleges, had an obligation to begin paying toward Intel's defense costs once the other two policies were exhausted. Intel's policy with American Guarantee calls for $50 million in total defense and or indemnity coverage.

In Intel's lawsuit against American Guarantee--referred to below as AGLI--the chip giant states:

The complaints in the AMD litigation, allege, among other things, that during the AGLI policy period of 2001 to 2002, Intel engaged in unfair business practices and anticompetitive conduct in its sale, promotion, and marketing of its microprocessors. Accordingly, these allegations trigger the potential for coverage under the "Advertising Liability" provision of the AGLI policy.

The chip giant further notes in its complaint:

Despite the clear potential of covered liability presented by the AMD litigation, AGLI summarily denied coverage leaving Intel to defend itself in the AMD litigation without the benefits owned under the AGLI Policy.

Intel is asking the court to find that American Guarantee has a duty to defend Intel in the AMD litigation, as well as pay out $50 million in damages plus interest.

American Guarantee declined to comment.

But in a lawsuit American Guarantee filed in the Delaware Chancery Court last week against Intel and the other insurance carriers, American Guarantee alleged:

In response to Intel's tender, American Guarantee sent multiple letters to Intel seeking information necessary to assist in its evaluation of Intel's coverage claim. Although Intel has supplied certain information to American Guarantee, most of the information requested has not been provided

Upon information and belief, Intel has also tendered the AMD Actions to certain of the Defendant Insurers. American Guarantee has requested that Intel provide it with the coverage positions of all other Defendant Insurers but does not know whether Intel has provided full and complete information in response to this request.

A trial date in AMD's lawsuit against Intel is set for February 2010. The two parties currently have depositions under way, said representatives for both Intel and AMD.

Considering the vast majority of civil cases ultimately reach a settlement, the Intel and AMD case has the potential of following a similar path.

However, it is likely too early in the game for an immediate settlement, given that the parties are gathering more information via depositions.

"Settlements usually happen when all the chess pieces are on the table and everyone knows what they're looking at," said Chuck Mulloy, an Intel spokesman.

An AMD spokesman said his company is looking for more than a check from Intel.

"Any settlement we would consider would have to include an end to any business practices that are at the heart of our case," said Michael Silverman, an AMD spokesman. "A check is not enough."