Intel's Maloney: Our business is do or die

SAN FRANCISCO--Sean Maloney has some issues with the European Commission's antitrust case against his company, Intel, which he says must either "thrive or...die."

Last week, Maloney was promoted, along with David "Dadi" Perlmutter, to co-manage the reorganized--and massive--Intel Architecture Group. Maloney, an executive vice president, had been Intel's sales chief, and many observers see him as the odds-on favorite to be Intel's next chief executive. (Current CEO Paul Otellini, though, is likely to be in his post for some time to come.)

Sean Maloney, executive vice president

(Credit: Intel)

On Monday, the European Commission published a "nonconfidential version" of its May 13 decision against Intel, which imposed a fine of $1.45 billion against the chip giant. That decision found that Intel broke EC Treaty antitrust rules (Article 82) by engaging in illegal practices to exclude competitors from the market for x86 processors, which are the basis for a vast swath of consumer and business computers.

The EC action was based on complaints from Intel's chief rival, Advanced Micro Devices. Intel appealed the decision in July to a European court, saying that "evidence was ignored or misinterpreted."

In an interview this week at the Intel Developer Forum, Maloney explained how Intel's business model, forged after a near failure of the company in early 1980s, requires it to be aggressive.

"I joined the company in 1982. We were getting our butt kicked by Asian competitors," Maloney said. "A few years after I joined, [then president] Andy Grove made the decision, let's focus on microprocessors. We exited all the other businesses, we laid off a third our staff. The company was hemorrhaging money," he said.

In 1983, Intel abruptly exited the memory chip business after Japanese manufacturers drove down prices and made that business unprofitable.

"So we picked one thing to do well, and we put everything behind that," Maloney said. "We're not like a Samsung that has 50 different businesses, or a Sony with 20 different businesses, or an Apple with a bunch of different businesses. We were a company that specialized. If you're a company that specializes, you either thrive or you die. You don't have eggs in other baskets."

As a specialist in PC processors, Intel achieved tremendous success. "As a consequence," Maloney said, "the scrutiny has come along with it. Some of the scrutiny is fair. Some of it we're strongly pushing back on."

He continued: "We can show how the consumer has benefited from the microprocessor in terms of constant, constant price reductions. It's pretty unmatched in every other industry. The industry has a long history of cutting prices. And I don't know a single day in the last decade when you couldn't walk into a shop a buy competitor's product. We believe it's an open market."

[ironsmithfe]

Perhaps they broke the rules but over a billion dollar fine for something that likely made little or no difference in competitor sales, is ridiculous.

[Super2online]

This is just another classic case of the EU looking at American companies as a gold mine of wealth generating possibilities. Why do or create anything when you can sit back and fine companies for billions on a regular basis.

[mikedrud]

Agreed. The EU fine was ridiculous. Europe produces so little innovation now, they simply want to over-regulate how American and other companies do business there.

Will the same happen in the U.S. with so many Chinese, Indian and South American companies making in-roads into our market? We'll see.

[askgees]

The EU does this on a regular basis. They are as corrupt as it gets. Their suite against MS was due to the fact MS bundles Media Player with the OS and THEIR biggest competitor REAL SYSTEMS a EU Company can't get it's fair share. MS gives you Windows Media Player when you purchase the OS no different than they give you Internet Explorer. Real Player charges and then wants? to cry that they can't compete. The same applies to Netscape another company with ties to the EU. The EU is not about fair competition or insuring the people get the best products at the best price. It's about forcing other companies to subsidize failing EU companies. Intel should fight back and if needed take this to the world court. Make the EU look like the crooks they truly are. Maybe the EU should stick to fish and chips.

[Mr. Dee]

Something is seriously wrong with the EU, every little thing they must scrutinize. First it was Microsoft, Intel, now Oracle. What is wrong with them???? Stop looking quick and easy money EU, because I think its just plain ewww. Lazy!

[fazalmajid]

Intel got off lightly. The fact that AMD is today lagging behind Intel must not obscure that at the time, AMD chips were 30% cheaper than equivalent parts from Intel (and in fact Intel's fastest processors were slower than AMD's, and were the first to offer 64-bit mode x86, which is vital for servers).
European customers overpaid by (and presumably US and Asian ones as well). The EU would have been justified in imposing a fine of 30% of 5 years' revenues to make Intel disgorge its ill-earned profits. Instead, they got away with 5% of one year's.

[expat_in_uk]

Wow, I had thought the above comments were from Trolls, but after looking at the comment history for the above people, not so sure! Still, not touching most of the previous with a bargepole, but did find the citing of *Real Networks* (incorrectly named "Real Systems" in said post) as a EU company incredibly funny. I mean their headquarters city - Seattle, Washington - has a bit of a Euro vibe to it, but not quite that much..

Awhhh - I can't help myself - I'll nibble on some easy points... I imagine that AMD - an American company in case you were thinking otherwise - would feel pretty strongly that being allowed to supply no more than 20% of a manufacturer's output (one of Intel's stipulations that is part of the EU's cited reasoning for the judgement) was indeed very harmful to AMD's business.

The EU is using the large fines to send a message to large, dominant players that if they abuse their market position, they'll be taken to task. It doesn't matter where the technology originates, abuse with mine, yours or anyone else's technology is still abuse. That being said, if you traced the contributing technologies, some of them would undoubtedly lead back to Europe.

Anyway, judging by Microsoft's minimal amount of push-back on requested changes to Windows 7 in Europe - after earlier EU judgements - this signalling by the EU seems to be working. Will lobbyists and political money spread like cancer here and corrupt the dynamics as in the States? It's an unfortunate and very real possibility. So take heart you Freedom Fry lovers, Europe may one day have an oversight system just as hobbled and corporate-focussed as in the States.

[redscat]

Do not take Sean Maloney's comments at face value. I used to work at Intel. It was, for the most part, under Sean's direction, that Intel Capitol poured tons of $ into other areas (eg. telecom) in an effort to diversify and expand, well, check the results, Intel wound up losing billions and had to do huge write-offs. One example is the network processor business that was sold to Marvell, in which Intel only received pennies on a dollar. Now he's implying he had a hand in helping Intel to be laser focused in doing one thing and one thing well??? I give him credit for being a shrew business person. But to be trusted? No.

[zcnetonline]

I could not agree more with the redscat's comment. Sean Maloney was perhaps missing during the last several years from Intel. Outside, the x86, Intel flanked in everything they touched. They poored billions of dollars in new businesses that turned catastrophic. A recent article "Analysis: Intel and SoC -- try, try again" at this link http://www.eetimes.eu/semi/220200034;jsessionid=VHMVNVHOLUO0HQE1GHPSKH4ATMY32JVN) just contradicts Mr Maloney's views. While he may have been away the last several years from Intel :), there is ample sources out there about Intel' bad excursions.

[Jeach]

The EU ruling was quite fair! The rules are simple and if you break them, you will pay... it's that simple!

The U.S. is just as bad with its own 'babysitting' of European companies doing business in their geographical territory.

Besides, if U.S. companies don't like it, they can always stop doing business in Europe. No one is forcing any U.S. company to do business in that part of the world.

But anyway, to get back to the article:

"We can show how the consumer has benefited from the microprocessor in terms of constant, constant price reductions."

Price reduction has NOTHING to do with Intel? It's all part of this industry! No matter which company does it, moors-law would still take into affect.

"And I don't know a single day in the last decade when you couldn't walk into a shop a buy competitor's product. We believe it's an open market."

Ah, actually I have! I live in the Montreal (Canada) area and on many occasions I walked into our largest computer store (Microbytes) to buy AMD PC's or parts and got refused. When asked why they did not want to sell AMD parts, I would get this huge lecture on how Intel is better and they dominate... not to mention the fact that their gross profit was higher on Intel parts.

The same situation occurred from the same stores when I wanted to buy AMD servers a few years later. Got refused again!

Also, walk into any Future Shop store and talk to sales representatives. They will make AMD products sound like x386's and Intel like Alpha's. When asked why, they come up with the stupidest stuff you could imagine. So some how, some way, a lot of bias is created and passed along the distributor chain!

[i_made_this]

Thank the Lord for the EU Anti-Monopoly Enquiries. If they didn't open up the flow of info to the world's public, no one would.