June 28, 2005 12:49 PM PDT

AMD's case: Market forces or manipulation?

Coercion or circumstance--that's the big question in the antitrust case filed by Advanced Micro Devices against rival Intel.

The suit, filed late Monday, provides a fairly detailed and lengthy laundry list of alleged misdeeds by Intel. The complaint alleges that in 2002, for instance, Intel agreed to pay NEC more than 300 million yen per quarter in exchange for caps on purchasing from AMD. AMD's share of NEC's consumer business went from 84 percent to virtually zero in six months, the complaint says. It also states that NEC constrained sales efforts around Opteron-based servers.

HP even turned down free microprocessors from AMD in 2002, while Intel pressured HP senior managers to fire an executive who developed a plan to use AMD chips in HP's Evo brand computers, the complaint states.

"There is no reason, other than Intel's chokehold on the OEMs, for AMD's inability to exploit its products in important sectors, particularly commercial desktops," paragraph 58 of the complaint states.

AMD, though, will also likely have to counter assertions that its success or failure comes as a result of demand, product delays or customer inertia. Simply put, larger chipmakers typically can produce products for less money than smaller ones, and price and familiarity often trump technology.

"The question is, 'can AMD find the smoking gun?'"
--Kevin Krewell, editor in chief
Microprocessor Report

"The question is, 'can AMD find the smoking gun?'" said Kevin Krewell, editor in chief of the Microprocessor Report. "There is some circumstantial evidence that something is not right."

The complaint, for example, alleges that in late 2000, then-Compaq CEO Michael Capellas stopped buying AMD desktop processors because Intel "had a gun to his head."

AMD further alleges that it was negotiating with IBM on a commercial PC business partnership, which ended after Intel offered IBM "millions" in market development funds.

But in late 2000, the PC market was in a free fall. Jerry Sanders, then-CEO of AMD, said at the time that the company's goal of getting IBM, HP or Compaq to adopt an AMD chip for a business PC that year was being pushed out because of sluggish demand.

Corporate customers are also notoriously conservative, said Krewell, adding that having only one type of chip (versus chips from two companies) can reduce support costs. For AMD, getting that close to a corporate desktop deal was, in fact, a milestone for the company. The company had suffered through five years of financial losses and several product delays from 1995 to 1999. The situation began to turn in late 1999 when Intel began to falter and benchmarks testers said that AMD's Athlon chip bested Intel's desktop parts.

Another opportunity to surge ahead in desktops came in 2003 when AMD came out with a 64-bit desktop chip. While this move could have beat Intel handily, Microsoft had to delay its Windows for 64-bit chips so many times that AMD's potential advantage became ameliorated.

Other parts of the complaint allege that bundling discounts offered as part of Intel's Centrino chip package for notebooks, which debuted in 2003, have also harmed AMD.

Intel and AMD:
A long history in court
Monday's suit doesn't mark the first time AMD has accused Intel of antitrust violations. We look back at the companies' legal tangles.

But, at the same time, AMD has put most of its efforts in the past few years into breaking into the server market and expanding its reach in the desktop market. The company only came out with a product, Turion, that more directly competes against Centrino notebooks a few months ago. HP has adopted it.

Servers present another likely AMD said/Intel said situation. Paragraph 83 of the complaint alleges that Intel tried to intimidate Fujitsu-Siemens into backing out of supporting AMD's Opteron chip at its April 2003 launch, and said that the European manufacturer would be the only major computer maker present.

As it turned out, IBM showed its support for Opteron at launch. Through Opteron, AMD has also gone from having virtually zero market share in servers to more than 6 percent and contracts with HP, IBM, and Sun Microsystems.

Overall, AMD tends to do well in years where Intel is suffering through problems of its own, such as in 2000 and 2004. When Intel recovers, AMD's opportunities fade, even if it is still scoring better on benchmarks. Still, the growing acceptance of AMD and its track record should, logically, let the company succeed even if Intel is not flailing.

"Technological superiority doesn't always win out," said Dean McCarron, principal analyst at Mercury Research. "But we also have two companies with extremely competitive products."

If anything, the complaint will likely be pored over in minute detail by the legal departments of PC makers. So far, PC makers have adamantly refused to comment on the cases. Nonetheless, executives from many of those companies, including the alleged executive HP almost fired for making overtures to AMD, may be compelled to testify.

6 comments

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A victory for AMD is a victory for free trade!
Read the complaint and make a comment.
Posted by 4nchip (23 comments )
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AMD superiority
AMD has provided top performing processors that are more affordable and just as reliable (and often more so than Intel). I have never purchased a PC with an Intel processor and never will given a choice. It seems that like Microsoft, Intel cannot tolerate any competition. Especially when it bests Intel's offerings.
Posted by (23 comments )
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My thoughts.
If Intel does what AMD claims they do then they need to pay one way or the other. That may be business as usuall, but it is tell unethical and probably illegal.

All I can say about AMD is I love them. However, what good is being the best or even as good as the other guy if you can't sell your products.

If I remember correctly Microsoft got in trouble for the same tactics. I don't think is should be lawful for any company to force another company to not sell competitors products by giving them a dicount or anything else.
Posted by System Tyrant (1453 comments )
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overdue
go amd! even if amd doesnt win or this takes years... it will show intel to be the cheap ***** they are...
Posted by paintedover26k (15 comments )
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About time
Hopefully this will work out right, and the government wont take funny money like they did with Microsoft.
Posted by wazzledoozle (288 comments )
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Intel Tactics
I'm a small system builder who does alot of consulting work on the side from my primary job working for a telco.

I don't build very many systems, but I use AMD chips exclusively. In the end, all that I have to say is this: The suit between Sun and Microsoft, Apple and Microsoft, the merits of the case was questionable. But, with AMD and Intel, AMD has a very strong case against Intel and I think that they will win, but IANAL.

When AMD came out with the Athlon, Intel was totally p****d off at them because AMD had a superior product. My 4 year old Sony VAIO Laptop uses a AMD Athlon 4 Mobile processor at 1.2GHz and when compared to a coworker who just bought a bran spanking new laptop with a 1.7 GHz Intel Celeron with Centrino technology. My 1.2GHz is faster than his 1.7GHz. Even my 1.4GHz Thunderbird is faster than a 1.7GHz P4 system with RamBus memory. I'm using DDR266.

And to add insult to injury, AMD came out with the Athlon 64 chips which caused a feeding frenzy that continues to this day while Intel's Itainium chip has been on the market for 2 years prior to AMD launch and still hasn't gained acceptance in the marketplace. The primary reason for this is that the Itainium is not a native x86 processor. The x86 mode is emulated, which causes a major performance hit. As a business, why should I have to spend thousands of dollars to buy all new software to take advantage of Intel's new hardware architecture when AMD's 64 bit chips perform far better with my existing software? That's good business sense if you ask me.

Futhermore, you will be hard pressed to find any commercially available PC that uses AMD chips outside of custom jobs or special requests. Fry's Electroncis occationally sells $99.95 PCs that use AMD chips in them, which is one of the rare commercially available prebuilt machines that you can find with AMD parts.

Yes, Intel needs to be knocked down a peg. I think that we are going to see some very interesting things in this case like we did in the Microsoft anti-trust trial. Personally, I will be happy to testify against Intel on behalf of AMD as an expert witness.
Posted by Maelstorm (130 comments )
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