Intel CEO fires back at EU

In a conference call this morning, Intel CEO Paul Otellini responded aggressively to the allegations attached to the $1.45 billion fine levied by the European Union.

The fine was levied because EU regulators determined that Intel had violated antitrust legislation and engaged in anticompetitive practices to exclude competitors from the market for x86 (Intel-compatible) processors, the Commission said in a statement Wednesday.

Otellini began with an opening statement, citing the Commission's allegations of the chipmaker "granting conditional rebates, where the conditions just weren't just volume-based but allegations about exclusive dealings or in one case exclusivity on retail shelves."

Intel CEO Paul Otellini

(Credit: Intel)

"Intel strongly disagrees with this decision. We do not have those kinds of conditions in our contracts. Our contracts are straightforward. They're consistent worldwide and they're volume-based: the more you buy, the less you pay," he said.

Otellini said Intel will appeal the decision. "We intend to appeal this decision to the (EU) Court of First Instance. We believe a significant amount of evidence was either ignored or disregarded or both by the case team that would refute the allegations," he said, adding: "We intend to abide by whatever was written in the decision as we go through the appeal process."

Responding to a question about the evidence that Intel showed to the EU, Otellini said that OEMs (that is, PC and system suppliers) have stated they were no exclusive deals. "There are a number of documents that refute what was claimed here. In some cases, OEMs made statements that they were not exclusive deals and they were not under conditional terms and those documents were not allowed either into the case file or used properly by the case team in making a determination," he said.

He continued: "The process is originating from a single complainant--AMD. None of the customers complained as part of it or joined the complaint," Otellini said. "I don't see any consumer or competitor harm happening here."

Answering a question about how will this affect Intel business practices, Otellini said he hasn't seen the more than 500-page document yet. "The two-and-a-half page summary released to us did not include what the specific remedies they're asking for are. If it is about 'don't do conditional rebates based on exclusive terms,' that one's easy: we don't do conditional rebates," he said, referring to special rebates alleged by the EU.

Responding to questions about what the U.S. federal regulators may do, he said: "There is an investigation at the FTC. There's also one in the United States at the New York Attorney General's office. Intel is fully cooperating with both of those. We've produced evidence, testimony and so forth. The FTC has had a position on antitrust which is very much comparable to the EU's so we're actually being looked at under the same lens today by both parties."

"The dynamics of competition"
A question was posed about Intel and AMD competition and how that may change as a result of the EU decision. "It's hard to imagine that the dynamics of competition would change," Otellini said. "Most customers buy from both suppliers today. Most customers buy more or less from each supplier depending on the quality of the product, the competitiveness of the product, and the pricing. That dynamic hasn't changed in my career at Intel, which is 35 years. I don't expect it to change. I don't think a customer is going to put him or herself at a disadvantage by buying an inferior or more costly products, just to try to walk the lines that may be artificial."

And in response to a question about past government actions in other countries and the size of the fine,Otellini said, "Korea imposed a fine of $23 million dollars and Korea is not 1/1000th the size of Europe. There seems to be no correlation between the number and the process."

Answering another question about alleged wrongdoing: "In Japan there was no admission of (Intel doing) wrong and there was no fine. What they asked us to do was something we were already doing in terms of the way we write our contracts. Essentially no change to our business practice. In Japan, three years of subsequent audits in Japan with no violations or no additional comments." About past U.S. investigations, Otellini said: "We were investigated before and we came out just fine."

In response to question about Intel's European operations, Otellini said, "Intel has something north of 5 billion euros invested in Europe, 6,000 employees--the majority of those employees are in Ireland--the fourth largest manufacturing site in the world and the largest outside of the U.S. That site produces some of our most advanced products. We see no change to that or to that investment. We have labs and engineering sites spread throughout Europe. No change to that."

Otellini said the sales and marketing team in Europe may be affected, however. "The sales and marketing team may be impacted by whatever is buried inside that 500 pages in terms of procedures that they have to follow and so forth but that's to be determined."

A question was asked of whether customers are afraid of Intel. "As to our customer's fear: It's absurd to think that we would not sell product to someone who happened to not like a particular comment or term. This is a very competitive business. Our customers are in most cases larger than Intel. Our customers have incredible buying power and are excellent negotiators. So, on the face of it, (the) scenario is absurd."

Finally, a question about why Intel doesn't release more documents. "Our customers don't want to it be released, I think. My understanding is that we'd be OK on that but our customers have said no." Otellini continued: in the EU summary statement, "The EU alleged that we had exclusive deals. They further alleged that they couldn't find any evidence of those exclusive deals, therefore they must be either oral or unwritten or hidden from them. I view it as being that they affirmed the fact that in fact there were no terms and conditions associated with exclusivity," he said.

Otellini continued: "These people (EU) picked up tens of millions of documents. They got everything they wanted to, it's hard to imagine that we would have terms that they wouldn't have found that exist. I am really baffled by that statement. I think it's actually helpful to us as we look through this thing that there are no documents that show what they're alleging."

[russkeller]

Unfortunately it's not just Intel that needs to get spanked. It was obvious enough back when AMD was making superior and cheaper product that something shady was going on. I don't know if the right thing to do is fine them though. Finding a way to Break them up seems the smarter way to go since they basically killed AMD at this point.

[GotAMD]

They've got to fund their governments somehow. Unfortunately, it looks like "antitrust" cases like this may be making a comeback.

[Dandy55]

Next thing in EU " to do" list should be to organize a crowd to cry about "convicted felon Intel" - same way as it happened to Microsoft. To be successfull robber and pillager, simply grabbing the money is not enough - you have somehow to brainwash general public and imprint the notion that your victim is actually responsible for your crime...

And you don't even need to provide any real evidence - now Intel is "convicted felon", the deed is done!

[Police_States_of_America]

this is how socialist governments are funded. money does not come from thin air. to give to the poor you must first take from those that hold value (in this case money)

[marc_90292]

Right!!! We let a company restrain the trade by illegal acts - so that we are not being accused of being socialists - Police-State of America? I thought it was the EU who took action.

[DMAN3k]

Intel blatantly commits anti-trust strategies and you guys call EU socialist governments?

Maybe we're just not into that ANARCHIST government strategy where even slavery could be supported.
[CNET editor's note: Personal attack deleted.]

[Hunnter2k3]

This is true, Intel play with AMD every year.

But on the other end, i don't want the EU turning into another antitrust abuse fest.

If anything, the patent system needs to be changed. But it is a decade too late. Changes on this scale would cause severe backlash.
Then companies would be going back to actual sabotage rather than depending on the patent system... and we don't want that to happen again.

[fgsdfgdsfgdsfg]

Your comments don?t show you to be an intelligent person making a reasonable argument. You say Intel "blatantly commits anti-trust strategies" yet you fail to even mention a single one that has been factually proven. It sounds more like you just hate big successful business. Let me guess. You think Microsoft is evil too. I have a suggestion. Why don?t you direct that mistrust and anger where it really belongs, big governments.
The bottom line is? Intel makes a better product and that is why they sell more. I maintain over 30+ servers at my job. Each one has an Intel inside. I also have many workstations that run high cpu intensive programs. Again Intel Xeon rules the roost. They run cooler, they consume less power, and they perform better per watt. When you run a data center, like I do, that is what rules the day.

[jjbenning]

I'm sorry...who is the idiot? Are you trying to make a case for an argument? The EU has a political axe to grind against Intel...and Microsoft, for that matter. AMD is supporting the EU because their engineers can't design their way out of a wet paper bag, much less a quality CPU - and they would rather play the blame game on Intel rather than compete on a quality standpoint. All of the OEMs named in the case have submitted statements supporting Intel's position - the EU just refuses to acknowledges them, which in my view is not only interference, it's a play for control - in addition to generating revenue for their use apart from taxes. This is not punitive - it's outright blackmail. You don't get to 80 percent plus market share by cheating - it simply doesn't work that way.

[jonathan0766]

To respond to the very ignorant slavery comment. It was European nations that were primarily responsible for slavery throughout the centuries between America / Africa. America at the time in which 99% of all slaves were imported was nothing more than a group of European controlled colonies. Europe captured the slaves, owned the ships, and brought them to the colonies, and sold the slaves. America takes the flack because the slaves were shipped here, and so the impact culturally and politically primarily occurred here. It was a European business centuries before America existed. The European policy was: ban slavery at home (at least for some nations anyway, like Britain), and then run slavery rings all over the planet outside our own borders. Why just take a look at what European conquest did to Africa, it'll take a century to recover at a minimum.

[star_navig8r]

It is not the first time governments sued companies and basically levied a horrendous financial charge as a way of taxing individual corporations! Intel has been lucky it has taken longer to reach them, but the slippery slope continues. "Intel Inside" will now cost even more . . .wah-wah!

[Zoombara]

In a case like this where a bunch of countries (EU) are going to benefit from an American company I believe Intel would be best to just shut down all EU operations. The Ireland factory should just be closed and a new one opened in the US, heck as far as I'm concerned they could even move it to an Asian country just so long as Intel doesn't employ as many from Europe. I know it wouldn't be in Intel's interest to stop selling in Europe but that is something that would be nice to see, not in so far as no more workstation ICs but the fact that Intel's volume of embedded systems is far greater than any other chip manufacturer and without embedded systems the EU would be back in the stone age.

[wango2007]

Companies in the EU are not innovators, so their governments are reduced to attacking companies that do in order to get money. The EU is no better than Somalia pirates.

We are past due for the US to attack some EU company and wipe them out with some preposterous fine. It would be the right thing to do.

[marc_90292]

Of course not, the only innovators are in the U.S. !! Wake up and smell the coffee. And then look at the caves our car inductry is in.

[X-C3PO]

EU: Next one is Google, it worth to fine 3 billion.

[blafouille]

If America do not like buisness whith EU... goodbye!Computer will run few electrons slower but they will run...

[mupptasstic]

Companies in the EU are not innovators, so their governments are reduced to attacking companies that do in order to get money. The EU is no better than Somalia pirates. 2


what are you on about?....no innovators here....LOL, ignorance is truly bliss.

[mupptasstic]

In a case like this where a bunch of countries (EU) are going to benefit from an American company I believe Intel would be best to just shut down all EU operations. The Ireland factory should just be closed and a new one opened in the US, heck as far as I'm concerned they could even move it to an Asian country just so long as Intel doesn't employ as many from Europe. I know it wouldn't be in Intel's interest to stop selling in Europe but that is something that would be nice to see, not in so far as no more workstation ICs but the fact that Intel's volume of embedded systems is far greater than any other chip manufacturer and without embedded systems the EU would be back in the stone age."


yes beacause no other chip makers seeing a new vast market would slot themselves in to take advantage....the US is all about the free market and the glory of compettion, you'd see it in it's truest form if Intel did that....well just after the board got fired for losing 30 of their annual revenue at a stroke.



I can see why you and your buddy are not CEO's of a large company with that level of business savvy.

[Zoombara]

AMD has had their chance for the past 20 years and when the first multicores were coming out they had a technological advantage over Intel but did nothing to better themselves. Why punish a company that has time and again reinvested into their technology and have made breakthroughs while the competition stands by? I do digress that if you clearly read my argument my main claim is Intel's true strength is with embedded systems and not so much with workstations, and to that end the embedded market does have competition such as Texas Instruments and STMicroelectronics they however choose to not deal with the breadth Intel does, so again why punish those who excel?

[jjbenning]

You don't get to 80 percent market share in the world by designing crap and marketing it - eventually you go out of business. You get there by designing quality products and marketing them intelligently. This blatant piratical move by the EU is baseless, cowardly, atrocious, underhanded, and typical of an oppressive government looking to stifle success and creativity. AMD is just the noisy kid on the block who is all hot air and really doesn't say anything worthwhile.

[mupptasstic]

this is how socialist governments are funded. money does not come from thin air. to give to the poor you must first take from those that hold value (in this case money)2


yes, we are going to use Intels lovely money to fund gay marriages and then those gay couples can adopt kids and feed them heroin and make them hippies, and we're going to keep suing super successful US compaines to fund it all....yay!!....it's a glorious revolution we're going to create....I love being a eurowussie..

[nowonderhowthishappened]

AMD is already running in big losses and there is nothin special why they raised this.
Intel was ranked 2nd for ethics last time and soon after if this happened what should we understand.
If Intel was corrupted, AMD woldn't have been in picture at all. Intel is the only company i would say follows their 6 principles or values to the most and doesnot allow even its employees to be corrupted what ever loss they encounter

Can any one say a better product released by AMD in past 3years.
Intel is already on 49 nm and now invested 7 billion dollars for 32 nm products...obviously the cost of the product will comes down and they call sell better products for less price and it is blamed to be reducing the price and killing AMD
AMD needs to be killed only if it has life and people are saying it is a competito to Intel. May be AMD is thinking so but Intel never thinks so as the ratio is 80:20 like an ant and an elephant
AMD clearly told that htey don't havemoney to inverst on 32 nm so obviously their produtcs are not going to be better and Intel always lead and can seel their procuts for less price
If Intel was intentive, it could actually sell the products for say 2 years with neither profit nor loss and belive me AMD will no more be there in picture

[JJDickson]

Intel should just refuse to sell their products to European countries, or else put the prices up for European countries. Their product does not belong to anyone but them, until it is exchanged for an equal value. The EU fine is immoral, imposed by a corrupt body. JD.

[markypolo911]

My advice for Intel. Pull out of Europe. Close all factories. Lay off all workers. Tell Europe to go F*** themselves!

[jjbenning]

I'm with you on that one. To hell with the EU.