September 1, 2005 2:00 PM PDT

Intel answers AMD in court

Intel answered Advanced Micro Devices' latest antitrust complaint on Thursday, denying AMD's allegations and offering what it said are factual tidbits that will likely keep Silicon Valley buzzing for days.

In a 63-page document filed in U.S. District Court in Delaware, Intel emphatically denied having a monopoly on PC microprocessors and locking out AMD from deals with computer manufacturers through threats and targeted rebates. In its lawsuit filed in June, AMD claimed that Intel imposed scare tactics and coercion on 38 companies, including large-scale computer makers, small system builders, wholesale distributors and retailers.

But Santa Clara, Calif.-based Intel asserted that it has achieved its larger market share through sustained investments in research and manufacturing. Intel's discounts and marketing deals with PC makers, the company added, help consumers by keeping PC prices low.

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What's new:
In a legal response to AMD's antitrust charges, Intel emphatically denies having a monopoly on PC microprocessors.

Bottom line:
Intel went a little beyond the minimum in its legal reply and tossed in allegations it hopes will hurt AMD's credibility. If history and the current allegations are any indication, it will be an ugly fight.

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Intel said it also benefitted from AMD's strategic errors. AMD didn't invest as heavily as it should have in manufacturing capacity in the early part of the decade, whereas Intel did, the company said, and is reaping the benefits. AMD didn't pursue notebooks as aggressively as Intel, and thus missed out on the current surge in sales, Intel alleged.

In a jab at AMD CEO Hector Ruiz, Intel noted that Ruiz recently said his company "is in the strongest position that we've ever been in." AMD's complaint, however, stated that AMD is at risk of becoming "nonviable" because of Intel's conduct.

In its answer, Intel refuted that claim. "AMD seeks to impede Intel's ability to lower prices and thereby allow AMD to charge higher prices," the company said. "AMD's colorful language and fanciful claims cannot obscure AMD's goal of shielding AMD from price competition."

Tom McCoy, executive vice president of legal affairs at AMD, scoffed. "Intel uses its abusive practices to lock in artificially high prices. They don't want to talk about the fact that they have a gun to the head of the industry," he said. "Our potential customers are not free to choose on the basis of price and performance. That is why we are not far more successful."

But the parts of the document that will likely draw the most attention are nuggets that shed light on how the PC business operates and that seem calculated to undermine AMD's credibility. The he said/she said nature of the lawsuit, as well as questions about which side can provide evidence to prove their points, have become pivotal to the case.

Intel and AMD's long history of competing for microprocessor dominance has landed them in court before.

In its answer to the latest antitrust allegations, Intel referenced a 1992 ruling in which an arbitrator awarded AMD $10 million.

Intel admitted that it paid the $10 million, but added that the amount paid was less than 1 percent of the original claim. The answer also stated that the arbitrator in that case wrote that AMD was "victimized by its own inability to adjust what it knew to be in reality."

"AMD assumes a somewhat romanticized factual situation which, like Camelot, never existed," the arbitrator wrote, according to Intel's response to the most recent complaint.

The transcript from the 1992 arbitration remains under seal, an Intel spokesman said. Intel quoted from it because AMD has made the 1992 arbitration an issue in the case.

Later, in a 1995 legal settlement between the two companies, Intel noted that AMD left out the terms of the settlement in its complaint. In the settlement, AMD paid $58 million to Intel in licensing fees. Overall, Intel netted $19 million from that settlement, an Intel spokesman said.

In another section of the answer, Intel said Sony dropped AMD processors from its PC lineup in 2003 in an effort to reduce the number of component suppliers and not, as the complaint asserted, in a contract that demanded Sony exclusively use Intel chips.

McCoy said it was Intel's choice to ?walk down memory lane? and that he wouldn?t follow.

In the complaint, AMD asserted that Intel intimidated MSI and Atipa and Fujitsu-Siemens from participating in the launch of AMD's Opteron Chip on April 22, 2003. Intel said in its answer that Atipa and MSI put out press releases outlining their support for Opteron on or around the same day and that Fujitsu-Siemens sells Opteron servers.

The complaint asserted that then-Intel CEO Craig Barrett said Acer would suffer "severe consequences" if the company participated in the launch of AMD's Athlon 64 chip, according to Acer founder Stan Shih. The answer said that Shih has refuted the assertions, stating that the conversation with Barrett only dealt with industry trends. The answer also noted that Acer continues to use AMD chips.

In its complaint, AMD asserted that Intel prevented it from joining the Advanced DRAM Technology group, a group working on a new memory standard, in a meaningful way. Intel said the organization invited AMD to join as a "co-developer," the highest level of membership. Intel further added that the ADT fell apart without producing a standard.

These sorts of complex claims and counterclaims often arise in legal complaints and responses. Many dissolve after the discovery process, which has not yet started in this case.

Perhaps the biggest omission in the answer was that Intel did not directly refute AMD's allegations that got the most attention when the complaint was filed--that some PC executives said Intel "had a gun to (their) head" and that Intel threatened to pound them into "guacamole." Instead, Intel said it couldn't determine the factual basis of those allegations at the time and denied them on that basis.

8 comments

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MUD
I have a distinct feeling that no matter how this turns out AMD is going to come out with mud on it's face and it's name dragged through it. But it may server to put Intel on notice to be very careful of it's business practices.

Still not as bad as SCO vs Linux.
Posted by System Tyrant (1453 comments )
Reply Link Flag
Re: MUD
Lets hope AMD can keep their nose above the mud well enough to remain competitive. Had they not forced Intel to drastically reduce their price several years ago, we would probably still be paying more money for less performance today. I would hate to see what would happen if Intel regained the power they once had.

If the PC executives who allegedly told AMD that Intel was harassing them can back their claims up in court, then something may come of it. Otherwise, a bunch of name calling and he said/she said stuff will turn the court into a muddy pigpen.
Posted by BR-549 (20 comments )
Link Flag
Vote with your wallet!
If you believe that AMD is the best, by all means buy AMD. But, if like so many others who bought AMD during the '80s and '90s, you believe that Intel is the way to go, then buy Intel. Many people who bought AMD in the past have never recovered and will now only buy Intel. It doesn't matter what AMD claims Intel has done to them, people will buy what they think will give them the most bang for their buck. AMD let an awful lot of people down in the past. Who can forget the famous K5 and K6 series? FYI: I own both - AMD for gaming, Intel P4 for SOHO. Works for me.
Posted by Des Alba (68 comments )
Reply Link Flag
I agree with you.
I am a firm believer that people should buy what makes them happy.

However, I have been running AMD since the 90s and I have never had any problems (started with an Athlon 800mhz). Of course I didn't have the K5 or K6, but I never had one ounce of problems my Athlon even running the nVidia cards. As I recall it wasn't bad processors it was lack of compatible motherboards.

Truthfully I have had more problems with Intel processers than I have with AMD, but I have had more Intel procs than AMD too. I have nothing against either company and I still will use both. I have a preference to AMD these days because I believe they work better, stay cooler, and pound for pound cost less than Intel. However, when Intel finally does move to a better dual core processer based on the Pentium M processers that will all probably change.

I don't know whether or not this lawsuit has merit. Intel is not going to come out and just lay down and say that they did something wrong or illegal. I figure no matter how this turns out AMD is going to come out looking like a sore looser who has to compete with lawsuits and that's sad. AMD is a good company that maybe taking the wrong path even if it is the legally right one.
Posted by System Tyrant (1453 comments )
Link Flag
What???
What are you talking about, AMD processors have always out performed Intel and are fully compatible. I supported AMD PC's during the 90's with no problems whatsoever. The Intel based processors performance was far below par and a big waste of money. Being the underdog, AMD had to deliver a better product to survive. They continue to do so to this day.
Posted by (23 comments )
Link Flag
Long time AMD fan
I have used AMD since the original K6 chip came out (it was in
my fisr computer) and I have no issues of any kind with them. I
was using AMD right up until the time I switched to Macintosh 4
years ago. I didn't switch for any perceived lack of ability on the
part of the hardware, I wanted away from windows.

I have used and still recommend AMD for PC's to my friends,
family and their friends who don't want to switch to Mac.

AMD's are less expensive, cooler running (for the most part),
and, I beleive, faster clock for clock than Intel. If Intel didn't
charge so damn much for their products, the story might be a
little different.

However Intel being a tech company and AMD being a tec
company I don't take what either of them say at face value. I
believe that everyone in the industry does their own form of
"monopolistic" practices. They each want the advantage and they
will do anything they can get away with to acheive it.

I hold this veiw to be true of just about any tech company
whether it be software or hardware. All the lawsuits are really
starting to bug me, can't they all just grow up,...
Posted by corelogik (680 comments )
Reply Link Flag
Why?
Antitrust suits do not have a track record of being effective for individual companies. There either defeated outright or by the time such decision is reached the effect is quite moot for the corporation in question. Why is AMD bringing this now?

It would seem there line-up is as strong now as it ever has been. I've heard nothing of their past yield problems and compatible chipsets are at an all time high. Why pull some SCO knee jerk right now? It's going to a be PR nightmare and it makes me wonder if there's something they should be telling their shareholders.
Posted by logic_ration (4 comments )
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