Home » Business » Business Law Features » Intel just can’t lose

Intel just can’t lose

TGD Staff May 13, 2009 1,010

Opinion – Chip giant Intel has swept all before it by a combination of aggression, execution and sometimes bullying,  and it’s hard to see the Santa Clara gravy train ever hitting the buffers.

I’ve tracked Intel since 1981, when it was just beginning to come into its own  with the X86 microprocessor and when PCs – hard to believe – were primitive  little things that cost a small fortune and couldn’t do very much at all.

The €1.06 billion ($1.5 billion) the European Commission fined it today won’t make a scrap of difference to Intel’s bottom line. It’s the restriction on its practices which may make a difference. That depends on whether AMD is strong enough to be able to compete fairly across all different areas of the CPU  business. And that’s somewhat unlikely right now. Intel was first accused of unfair competition by the then CEO of Compaq, Eckhard Pfeiffer – way back in 1994. He accused Intel of dictating prices to OEMs, devaluing PC manufacturers’ branding and foisting its own multiprocessor specs on the industry.

I was there. Pfeiffer said: “We are not using Intel Inside. It’s in absolute competition with us over our own brand which is very important to us.” That was in 1994. This is 2009. Does anyone seriously think anything Compaq said 15 years ago made any difference to the industry during those years? Pfeiffer ended by saying that Intel shouldn’t impose products and prices on its customers, should not compete with it on systems, and drop Intel Inside.

In today’s Commission ruling, it says it doesn’t object to rebates in themselves, but to the conditions attached to them. The EU said that in order to be able to compete with Intel rebates, AMD would have had to offer a price for its CPUs  lower than the costs of producing them. The chip giant’s turnover is such that  the fine is a fleabite compared to the money it must have already have made in  the European territories over the years. It’s a cost of sale.

The Intel of today is a very different beast from the company of 29 or even 15 years ago.   In those intervening years, it has quite deliberately targeted a number of  different markets successfully. It has failed in other markets – Intel has no  organic shame – rather than a human being who would like to forget the past but  can’t, this chip company can forget and chooses not to remember.

The real landmark for Intel was when it started branding its microprocessors as  “Intel Inside” and devised a cunning plan to pay money and/or offer discounts if  OEMs (original equipment manufacturers) included the famous swish logo in their  adverts and on their products.

Intel got so jealous of that swish and that “Inside” word, that it set off teams  of lawyers to ruthlessly hunt down anyone who infringed it, including an outfit  called Yoga Inside – which was trying to teach yoga to prisoners – hence the “inside”

But in the meantime, it also had its eyes set on other markets it could safely  swallow up – including the not very often told story about how it wrenched NIC  (network interface card) technology from 3Com. It had its eyes set on Sun  Microsystems’ lucrative workstation market too, and of course the prize of all  prizes, the server market.  It still hasn’t quite got there yet. One of Intel’s  failures has to be the Itanium, although Intel will spin that as a success.

It wants the graphics market too. And if it concentrates really hard, there is a  possibility that its Larrabee technology will have a serious impact on both AMD  (ATI) and Nvidia.

No doubt Intel will appeal against the EU ruling – it has always denied that it’s  used muscle to ensure people will buy its chips. AMD’s lengthy antitrust case  won’t be heard in the USA until next year, and documents are still being  collected and collated. Intel’s lawyers will, no doubt, argue that any decision  made in Europe – or in Japan or Korea for that matter – has no bearing on the court case in the USA.

There was word earlier this week that the Obama administration is likely to be  tougher on antitrust cases than the George W. Bush administration. That’s as may  be. But the fact is AMD is currently in a desperately weak state. Intel will have  to back off in Europe, but that is likely to make no difference to its business  at all. Intel has, pretty much, won. We’d like to see AMD make a very spirited  attempt to fight back, but it’s low on strength right now, and Intel is a  voracious beast indeed.

Post Navigation

Seagate to axe 1100
EU hits Intel with $1.5 billion fine

Related Posts