Even for a company as powerful as Intel, with $13 billion in cash on the books, $1.25 billion is a lot of money. So why drop that huge quantity of money in the lap of its biggest rival, Advanced Micro Devices?
The payment is, of course, to settle the antitrust suit AMD brought against Intel five years ago. AMD's stock surged 22 percent Thursday after the chipmakers announced the agreement, but Intel's share price dropped 1 percent, indicating which company the investors thought got the better deal.
Paul Otellini, speaking in September and holding a wafer of silicon chips
(Credit: Stephen Shankland/CNET)AMD does indeed come away with some serious perks--not just the cash, but also a new patent cross-license agreement that removes Intel's objections to AMD spinning off its chip-manufacturing business, enables multiple manufacturers to build AMD's chips, and eliminates the earlier patent agreement's payments to Intel. And it has Intel's agreement not to violate a list of restraints on its business practices.
But Intel gets something out of this, too.
Spend now, save later
Let's start with the money. Sure, shareholders likely frowned when they heard Intel's fourth-quarter expenses are expected to climb from $2.9 billion to about $4.2 billion. But Intel could have been out a lot more money if things had gone south.
In the European Union, Intel is wrestling with an antitrust case that produced a fine of 1.06 billion euros, or $1.6 billion at today's exchange rate. Intel appealed the European Commission fine, but it's a very concrete example of just how severe the Intel punishment could be.
There are other financial factors, too. Intel and AMD were set to begin their jury trial in March, and jury trials are famously unpredictable. Add on top of that risk the fact that antitrust suits can come with triple damages.
"It was a small multiple of the damage that could be awarded in a jury trial," Intel Chief Executive Paul Otellini said of the price tag in a conference call earlier Thursday.
Treble damages of the scale of just the European Commission fine would have been more than $4 billion, Technology Business Research analyst John Spooner observed. Facing that prospect, "Intel chose to control its own destiny and settle up front."
Taking commercial cases to a jury trial is indeed risky, said Richard Brosnick, who's involved in antitrust law at the firm of Butzel Long.
"Any complex commercial case going to the jury phase is challenging, and antitrust, given the economics, is probably more challenging," Brosnick said. "Trial is expensive overall, not in billions, but in terms of the risk you'll be able to explain these issues in a way that will be understood by and persuasive to a jury."
Goodwill in other antitrust cases
AMD's antitrust case isn't the only one Intel faces. It's also got the European Commission fine discussions, a new antitrust lawsuit from New York Attorney General Andrew Cuomo, and an antitrust investigation from the Federal Trade Commission.
The AMD settlement doesn't make those cases evaporate, but Intel hopes it'll help.
"We hope that having this major litigation settled with AMD would be viewed favorably by these regulatory bodies and eventually the cases would be dropped," Intel spokesman Tom Beerman said.
Certainly those regulators won't face as much of AMD's active prodding. Among the terms of the settlement is this, regarding all the regulatory actions AMD is involved in:
AMD agrees to promptly...notify in writing each authority...that except as provided in Section 3.5 AMD has resolved its disagreements with and complaints concerning Intel contained in that Administrative Complaint and believes that this Agreement provides AMD with fair compensation for any and all actual or alleged harm and damages that AMD did or may have suffered in connection with matters discussed in the Administrative Complaint. In addition, AMD agrees that it will not ghost-write or edit any other briefs, pleadings, or "friend of the court" or "friend of the tribunal" materials or briefs in any Administrative Action.
But whether Intel will actually get what it wants isn't certain.
"It's certainly possible that the public agencies will view this as a compromise they can live with, but it's equally possible not," Brosnick said.
One issue is Intel practices described in the section 3.5 mentioned above, where AMD and Intel still disagree. Brosnick said the governmental agencies still might be concerned about any of those practices--called "retroactive discounts," "accused bid bucket," and "accused end-user discounts" in the settlement.
Intel digging in its heels?
Though the agreement didn't preclude those practices as it did some others, it did agree not to defend them as hard as it might in settlement talks with the government organizations.
"Intel agrees that in the event it enters into voluntary settlement discussions with a government authority in the EC litigation, New York litigation, or the FTC investigation, and if such government authority proposes to include in a consent judgment or other governmental order a prohibition against Retroactive Discounts, Accused Bid Buckets or Accused End-User Discounts, Intel will not challenge such a prohibition as a general matter, although it may challenge the scope or specific language of the prohibition," the settlement agreement said.
Just how deeply Intel will dig in its heels in the other cases remains to be seen. Although it settled a big case, Otellini hardly sounded contrite. He reiterated on several occasions his belief that Intel didn't do anything illegal. He said airing the full context of seemingly incriminating e-mail would show Intel in a better light. And he vehemently attacked the New York case.
"We strongly disagree with the New York attorney general case and believe the complaint is entirely without merit," Otellini said. "Discounts and rebates are entirely fair business practices, and it's unfortunate the New York attorney general chose to distort the facts. We would have preferred to engage in a dialog with the New York attorney general."
Then again, Intel spoke in strong terms about the AMD trial. Perhaps Intel's pragmatic side will show in the other cases next.
New York Attorney General Andrew M. Cuomo filed a federal antitrust lawsuit Wednesday against Intel that accuses it of paying computer makers rebates to illegally maintain its monopoly power, the newest among several such attacks that have dogged the chipmaker in recent years.
"Intel has engaged in a systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power and prices in the market for x86 microprocessors," the suit asserts. "By exacting exclusive or near-exclusive agreements from large computer makers in exchange for payments totaling billions of dollars, and threatening retaliation against any company that did not heed its wishes, Intel robbed its competitors of the opportunity to challenge Intel's dominance in key segments of the market. This illegal behavior was highly detrimental to consumers, competition, and innovation."
The suit "seeks to bar further anticompetitive acts by Intel, restore lost competition, recover monetary damages suffered by New York governmental entities and consumers, and collect penalties," Cuomo said in a statement.
The suit (click for PDF) makes the state the newest party to go after the dominant chipmaker. Intel also is in the midst of an antitrust suit brought by top rival AMD in 2005 and appealing a massive $1.5 billion fine from the European Commission from a later case in the European Union.
New York Attorney General Andrew M. Cuomo
(Credit: New York Office of the Attorney General)Intel will defend itself, Intel spokesman Chuck Mulloy said in response to the New York suit.
"We disagree with the New York attorney general. Neither consumers--who have consistently benefited from lower prices and increased innovation--nor justice are being served by the decision to file this case now," Mulloy said.
Of e-mails the attorney general quoted as evidence Intel abused its position, all already emerged in earlier cases, he added. "It is the AMD case filed 4.5 years ago. It's the same case the EU brought. There's nothing significant or new here that hasn't been discovered," Mulloy said.
According to the suit, computer makers "frequently decided, when faced with the array of incentives and threats which Intel brought to bear, to collaborate with Intel in restricting their purchases from AMD."
"In a February 27, 2003 internal Dell document, for example, it was assumed that 'aggressive' purchases by Dell from AMD could result in '(r)etaliatory (rebate) reductions (by Intel that) could be severe and prolonged with impact to all LOBs (lines of business),'" the suit said. "Another Dell document from March 2003 concluded that '(a)nticipated Intel response wipes out all potential opinc (operating income) upside from going with AMD.'"
And an unnamed IBM executive said in a 2005 e-mail that balancing business interests against Intel's response was hard. From the suit:
I understand the point about the accounts wanting a full AMD portfolio. The question is can we afford to accept the wrath of Intel if we do the AMD full portfolio? It is a very hard question to deal with. On the one hand, having Intel help us has been one element of why we are doing better in the market. If they start to sell against us again I am afraid that we would be in a very difficult spot. On the other hand, if we leave Sun and HP an opening with AMD we will (be) very exposed on that side of things.
Cuomo's office said it began investigating the case in January 2008, "reviewed millions of pages of documents and e-mails and took testimony from several dozen witnesses."
Updated 9:43 a.m. PST with further details from the lawsuit.
NEW YORK--The state senate in Albany was in a bit of a shambles Monday. So instead of speaking in-person at the Personal Democracy Forum as planned, NY Mayor Michael Bloomberg used Skype to make his keynote address.
"Through the miracles of modern communication, we're essentially together," Bloomberg commented to the audience at the Frederick P. Rose auditorium here in midtown Manhattan. He then spoke about how New York is using the assets of the digital age to make more information available to the city's residents--something that Bloomberg can pitch well, considering he made a fortune as the founder of the business news and information company that bears his name.
Mayor Michael Bloomberg
(Credit: NYC.gov)Bloomberg's new initiatives include Skype and Twitter accounts for NYC 311, the city's information hotline that Bloomberg launched several years ago; a partnership with Google to get more detailed information about exactly what people are searching for on municipal government sites (and what they can and can't find); and "Big Apps," a new contest for developers to crunch and remix city data into Web or mobile applications for the masses.
The economy, however, may get in the way. Any ambitious new city projects are taken with a grain of salt these days, and with good reason.
I, for one, was scrambling to get to Bloomberg's talk on time because cutbacks and delays on the B-D-F-V subway line had added literally an extra half-hour to my commute from downtown to the conference venue at Columbus Circle. Griping about the city budget is pretty commonplace around here these days, and Bloomberg himself is no exception.
"If any of you from around the world wants to move here," Bloomberg quipped over the Skype connection when conference organizer Andrew Rasiej commented that a thousand people were on hand, "we would love to have you. We need taxpayers."
The official information available on the Web to New York residents includes public school progress data and citywide performance reporting. Beyond that, Bloomberg's administration has chosen to support new and more efficient ways of doing business: it has given the thumbs-up to collaborative workspaces and launched a venture fund for tech and finance start-ups, among other things. These are all part of a way to combat the fact that the Wall Street meltdown has left scores of the city's professionals out of work.
With "Big Apps," Bloomberg is encouraging developers to participate in a contest that "will challenge all of you, and the whole tech world, really, to come up with new applications using city data."
"We'll be releasing a huge volume of data from a number of agencies," Bloomberg said before the Skype connection briefly cut off. Rasiej re-dialed in, and Bloomberg continued that he hopes the fruits of Big Apps contests will "create the connectedness that will benefit the city economically, civically, and socially."
If developers aren't willing to act solely out of a desire to help the city, Bloomberg said that Big Apps will indeed have cash prizes, as well as an even bigger incentive.
"I'll up the ante by taking the grand-prize winners out to dinner," he said.
Good to hear that's still in the budget.
The New York Times on Thursday rolled out its latest political application program interface, just as members of the 111th Congress are settling into their new offices.
The Congress API will enable developers to keep close eye on their elected representatives with data on specific congressional roll call votes and members' most recent positions on roll call votes. The API also provides lists of House and Senate members in specific years, as well as biographical and role information about specific members.
(Credit:
The New York Times)
The tool is one of a series of APIs the Times is developing to let its readers dissect the data it uses in its reporting. In October, it released an API to track campaign donations. The newspaper also released a movie review API and is working on several more, including a Times Best Sellers tool.
The information for the Congress API comes from the House and Senate Web sites, along with the Library of Congress site Thomas.gov and is updated throughout the day while Congress is in session. The tool works with information from other publicly available data sources like the Biographical Directory of the United States Congress and GovTrack.
The biographical data for House members goes as far back as 1983, while the data for House votes goes back to 1991. Developers can find information for Senate votes from as early as 1989 and information on individual Senators dating back to 1947.
Politicians are still slowly learning how to reach out to their constituents on the Internet, but that doesn't mean citizens can't keep tabs on Washington online. The latest new-media tool from The New York Times provides an embeddable widget that allows people to analyze campaign contributions made to the presidential candidates.
This graph is an example of the type of analysis possible with the New York Times' new API. Click graphic for larger version.
(Credit: New York Times)The campaign finance tool is one of the application program interfaces the Times is developing to let its readers dissect the data it uses in its reporting. The data for this API comes straight from the Federal Election Commission, though the campaigns are only required to report contributions of more than $200. As the campaigns file their last three FEC reports, the API data will be updated.
The API enables users to look at overall donation figures as well as donations broken down by state or ZIP code. Users can also search for contributors either by first name, last name, or ZIP code.
The Times promises to update the campaign financing tool, and it is working on other APIs as well, including ones for restaurant listings, congressional votes, and movie reviews.
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