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The European Union conducts more raids of Intel facilities to further arm itself in its fight against the chipmaker

More bad legal news came for the world's largest chipmaker, Intel, on Tuesday.  Intel's Munich offices were the target of another round of antitrust raids by the European Commission (EC).  These German raids were confirmed by a public announcement from Intel.

Chuck Mulloy, a spokesman for Intel, stated, "I can confirm that there has been a raid on our offices in Munich. As is our normal practice, we are cooperating with authorities."

Jonathan Todd, a spokesman for the Commission in Brussels also stated, "I can confirm that Commission officials have carried out unannounced inspections at the plants of a manufacturer of central processing units (CPUs)."

Todd cited that the raids were carried out to investigate alleged violations of rules against abuse of a dominant position and/or restrictive business practices.  Intel faces a hearing on March 11 and 12 over charges that it participated in price slashing, where it cut retail prices to below the cost of production and is accused of offering substantial rebates in a head-on effort to bulldoze its lagging competitor, Advanced Micro Devices, out of the market. 

The ruling in these hearings may depend somewhat on the analysis of evidence found over the course of the investigation.  However, evidence aside, Intel may face a significantly hostile atmosphere at the hearings, as the European Commission is currently very agressive following a heady $690M USD ruling against Microsoft.  With the EC looking to press more charges against Microsoft, investigating Apple, and charging Intel, it clearly is ready to take a hard stance on what it says are blatant abuses of the market system -- and it stands to gain a bit of financial bounty in doing so.  Chipmaker AMD has constantly complained about Intel's alleged abuses and has encouraged the European Union and other government bodies to aggressively investigate its rival.

If it is ruled by the European Commission that Intel broke antitrust laws, under European Union law, it could be fine Intel up to 10 percent of its global revenue.  Intel's total revenue for 2007 came in at above $40B USD, so such a fine could have a ceiling of around $4B.  The EC would be unlikely to pursue the maximum fine, though, and more likely Intel would receive a fine of around $500M USD to $1B USD, similar to the Microsoft judgement.


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Good times
By Aloonatic on 2/13/2008 9:49:39 AM , Rating: 3
We're all enjoying the wonderful prices of processors at the moment, with improvements coming thick and fast but how long will it last for if AMD finds itself not able to compete at all.

If they aren't good enough then OK, they should be allowed to fall by the way side, but it wont mean that we are going to be the ones to profit, Intel will.

It's one of those tricky "victim of their own success" type situations on the face of it, and we're all happy with our cheap C2Ds so what's the harm?

I guess it's easy to get a little partisan and assume that it's the EC/EU coming to the aide of a European based business, but what if Intel have actually broken the law?

Anti-trust/monopoly/anti-competition laws exist for a reason after all.

Whether AMD are producing good CPUs or not is neither here nor there. This is about Intel's alleged illegal practices.




RE: Good times
By TomZ on 2/13/08, Rating: -1
RE: Good times
By Aloonatic on 2/13/08, Rating: -1
RE: Good times
By TomZ on 2/13/08, Rating: -1
RE: Good times
By Aloonatic on 2/13/08, Rating: -1
RE: Good times
By Ringold on 2/13/2008 11:28:08 AM , Rating: 4
You're spending far more time attacking TomZ himself than you are attacking his logic. Your third mini-paragraph was the only thing coming close to a response.

At any rate, you also need to ponder what good would come of simply slapping a fine on Intel for actions taken, according to you, 5+ years ago. Consumers don't benefit, shareholders don't benefit, and unless the EC decides, in its infinite generosity, to give that fine to AMD then AMD doesn't benefit either. In fact, the only party that would benefit... would be the EC/EU. Then they can afford to put up another billboard up telling European's how fantastic the EU is.


RE: Good times
By Aloonatic on 2/13/08, Rating: -1
RE: Good times
By Ringold on 2/13/2008 1:20:25 PM , Rating: 4
quote:
So you are saying that no one should be fined ever?


That's not what I said. If competition laws are meant to protect consumers, then they need to analyze what good would come of a fine. It wouldn't necessarily inhibit future behavior as, apparently, it has already stopped. It wouldn't help Intel's customers, it wouldn't help AMD -- unless they gave the money to AMD, which doesn't seem likely.

quote:
milk an American company based purely on what they themselves think has happened as if it were fact.


That seems to be what you're really pissed at more then anything. They currently appear to be a bunch of people who presently exercise the power simply because they know they can and want to prove to the rest of the world they're actually important. They know they've got an easy target with American companies that won't create much domestic backlash. When they crack down on some Euro-zone based company in a big way, or take an AK-47 to some of their rigid domestic markets (utilities, ag) I'll change my opinion.


RE: Good times
By Aloonatic on 2/13/08, Rating: -1
RE: Good times
By Ringold on 2/13/2008 1:56:00 PM , Rating: 2
To the world, not to me. Possibly to themselves.

If you haven't seen anyone get a position of power and start flailing it about then I think you dont get out much. Needless to say, Golda Meir wouldn't have to admonish the EC with her famous "Don't be so humble, you're not that great."

If they desired to be humble public servants (like central bankers! -- shameless plug for economists) they'd toil in obscurity, not constantly make headlines.


RE: Good times
By eye smite on 2/15/2008 2:35:00 AM , Rating: 4
Just give it a rest man, now and on future articles. You're dealing with TomZ and his groupies and if you don't go with their popular opinions you get rated down. They'll argue with you that a dead horse is not dead, but merely in a transformational state of apathy and if you don't agree you get rated down. So save your energies for other things. This board of comments at times is proof that youth is wasted on the young.


RE: Good times
By TomZ on 2/13/08, Rating: 0
RE: Good times
By bhieb on 2/13/2008 11:33:51 AM , Rating: 2
They're not now but they may be...might....could possibly be someday somhow.

/sarcasm and puts back on foil hat.


RE: Good times
By jdun on 2/13/08, Rating: -1
RE: Good times
By Aloonatic on 2/13/2008 11:42:13 AM , Rating: 2
I haven't said consumers are/aren't being/have been harmed. It is only you that has made such a bold statement as if it were fact.

Nor have I said if their products are crappy or not.

I'm saying that a competitive market is good for everyone as long as it is allowed to be competitive and when one company "allegedly" abuses it's position it should be looked at and that all investigations by the EU/EC are not necessarily just an attempt to milk a US company again as that is all they do?!

If anyone was to go by this site you would think that the EU/EC just have two offices. One for the persecution of Intel and another for the persecution of Microsoft.


RE: Good times
By bhieb on 2/13/2008 11:56:02 AM , Rating: 3
quote:
I haven't said consumers are/aren't being/have been harmed. It is only you that has made such a bold statement as if it were fact.

That is because it is FACT. Answer the question posed, how have faster cheaper processors harmed the consumer (not AMD the consumer). Now not in the future maybe, but as of right now how is a lower priced better performing chip harmful to the consumer.

Tom never said Intel for a fact did not do anything wrong, just that cutting prices to gain market share on a competitor should not be investigated. Now if you want to accuse them of shady OEM exclusive deals then that warrants a look.


RE: Good times
By Aloonatic on 2/13/2008 12:04:16 PM , Rating: 2
quote:
Answer the question posed, how have faster cheaper processors harmed the consumer (not AMD the consumer)


I don't know, nor do you.

It is not fact.

Anyway, what do you mean by harm?

Do you meant processors should be twice as fast and half the price right now?

Who can say?

It's a silly argument???


RE: Good times
By bhieb on 2/13/2008 12:29:40 PM , Rating: 2
Can't argue with that "logic"


RE: Good times
By Aloonatic on 2/13/2008 1:33:36 PM , Rating: 2
Wait until the investigation is over and we mite (probably wont) get to see the numbers and if something has been going on and then we mite be able to say that the consumer was "harmed"

Just because processors have gotten faster and cheaper doesn't mean that everything is OK.

I don't really know what you want me to say?

The consumer was harmed to a degree such as, stubbing their toe or being punched in the face up to being shot out of a cannon?


RE: Good times
By TomZ on 2/13/2008 1:39:16 PM , Rating: 2
Yeah, I'm sure they'll let us know how the consumer was harmed, like with the Microsoft case(s), LOL!


RE: Good times
By eye smite on 2/15/2008 2:45:24 AM , Rating: 3
hehe I can tell you how consumers were harmed. They were told that faster is better for so long they believed it. Now you've thousands if not millions of consumers and companies with boat anchors called P4 that they were deceived into believing was faster. So they wasted their money, that's easy enough to see. Why didn't intel pony up the C2D long before 2k6 instead of touting the P4 as superior....because it was faster....because it was intel. It' not like they couldn't have since c2d came from centrino which was alive and well in laptops by end of 2k3 and proving to be as fast and in some cases faster than athlon64. You sarcastic bunch of fanboys can defend intel all you want, they've been a dirty company since the 60s when they were making IC chips for military contracts and that's where their mindset comes from. So I guess you could say intel is reaping the seeds it sewed. Oh wait that's biblical ummmm.........they're getting a fat dose of Karma, that's better. hehe
Just sad.


RE: Good times
By MAIA on 2/13/2008 12:35:43 PM , Rating: 3
quote:
How exactly are consumers getting harmed, by any stretch of the imagination?


You should understand economy works in cycles and such laws exist to prevent a future outcome which may harm consumers in the long run.

It has been already explained, as analogy, the big downside of having just one player in the CPU market, and how it will harm the consumer in the long run. Maybe you get cheap CPU's NOW, but if Intel has no competition, prices will go up. As simple as that, as simple as the basic law in economics.

Now, if Intel really performed "dumping" of their producuts, they should pay for it and never engage such practice again. You might try to justify their actions using any of your perferred logics, but dumping is dumping and it harms the market and the consumers in the long run.


RE: Good times
By TomZ on 2/13/08, Rating: 0
RE: Good times
By MAIA on 2/13/2008 1:02:45 PM , Rating: 2
I see wiki as a starting point to people not familiar with certain concepts.

From the same page

Under the WTO Agreement, dumping is condemned (but is not prohibited) if it causes or threatens to cause material injury to a domestic industry in the importing country.


RE: Good times
By Ringold on 2/13/2008 1:24:37 PM , Rating: 1
That definition has little to do with the situation at hand. Intel didn't go in to one single market and whack prices there and only there. AMD and Intel are both global in nature, and Europe has no "domestic industry"; Intel and AMD are both, to my understanding, US-based.


RE: Good times
By MAIA on 2/14/2008 10:11:32 AM , Rating: 2
I doesn't need to be "there and only there". AMD employs german workers. If AMD goes down the toilet, so goes their jobs, which directly affects the german and EU economy. That's why i understand and agree with EU action regarding Intel.

If there were more REAL contenders in the CPU market, i'd say their (Intel) practices would be ok, not right but ok. But if you think those practices push AMD to total failure and then, there would be no competition (which would be the case), then the EU has every right to do what it's doing.

Besides, it's narrow minded to think Intel and AMD as US-based contenders in a globablized world. Their market and production are worlwide. Anyway, your reasoning doesn't make any sense: first you say both are global, then you say they're both US-based (????)


RE: Good times
By LittleJimi on 2/13/2008 11:23:36 AM , Rating: 2
quote:
The EU also needs to stop treating these companies like some great source of additional tax revenue to tap into whenever the mood suits them.


I don't think that can possibly be the motive when the amounts of money involved are relatively insignificant. $690M is roughly 0.005% of the EU GDP, or put another way about $25M for each member state. Add in the direct and indirect costs of pursuing these anti-competition charges, and this would seem even less significant.


RE: Good times
By Hare on 2/13/2008 12:05:42 PM , Rating: 5
quote:
Too bad the EU doesn't understand the reason such laws exist. They should exist to protect competition and consumers, and when you look at the market situation, obviously consumers have not been harmed.

Too bad that you are looking at the short term situation. If competition doesn't exist, what would happen? Would the consumers still be happy? I doubt. Remember, we are not talking about barbershops here. These companies are huge and others can't just pop up to fill the void.
quote:
The EU needs to understand that the purpose of anti-trust laws is NOT to protect individual competitors like AMD.
And what would the other competitors be? The EU is not protecting AMD, they are makins sure that the market remains "healthy" and there's competition. In this case, most of the competition has already been wiped away. Remember Cyrix, Transmeta, Via? If AMD goes under, Intel becomes a monopoly.
quote:
If Intel broke anti-trust laws and consumers were harmed, then the EU should put in place a remedy. Anything else is poor governance.
... and that's exactly what's happening. Is this something that the EU is doing just to get money from American companies? I'll let you decide...

* Korean Fair Trade Commission Charges Intel with Antitrust Violations
* New York Attorney General Launches Antitrust Investigation of Intel
* A new complaint was filed in Idaho just days after the New York probe was announced
* Overview of Fair Trade Commission of Japan (JFTC) Recommendation against Intel for violating Japan's Antimonopoly Act
* AMD Motion for Leave to Serve Document Preservation Subpoenas Granted by U.S. District Court

etc. etc. etc...


RE: Good times
By TomZ on 2/13/08, Rating: -1
RE: Good times
By Hare on 2/13/2008 2:01:17 PM , Rating: 2
I already posted a link to their website in another message, so yes. Quick copy and paste.
quote:
Btw. AMD has started a website for all anti-Intel news.
http://breakfree.amd.com/en-us/default.aspx

Maybe they should just focus on making their products better. After all, that's what got them this far...

I haven't subscribed to any RSS feeds and don't really care if Intel has done anything wrong or not.

It seems that you completely missed my point. My point was that it's not just the EU that's investigating Intel and your view of what's best for the consumer is very short sighted.

Btw. Stop treating others as fanboys just because they don't agree with you, thanks.


RE: Good times
By Ringold on 2/13/2008 1:38:13 PM , Rating: 2
quote:
These companies are huge and others can't just pop up to fill the void.


AMD's market cap is less than 4 billion dollars.

The largest leveraged buy out: 45 billion (TXU).

Largest take-over bid: 147 billion (Rio Tinto)

Profit can be made in the chip sector. Competition is not at risk; if AMD can't survive on their own.. Last time I'll say it in this thread: Someone will buy them out and provide the capital necessary to compete. AMD is a small fry compared to deals that have been done and continue to be done; the Microsoft takeover of YHOO will be ten times the size . I know it's hard for liberals and Europeans to ponder the possibility, but the free market has it's eye on the situation. If I'm not mistaken DailyTech has reported on an AMD takeover already.


RE: Good times
By Hare on 2/13/2008 2:06:28 PM , Rating: 1
quote:
I know it's hard for liberals and Europeans to ponder the possibility, but the free market has it's eye on the situation.
Yes. Forgive us Europeans. Our markets and rules are so different that we can't really comprehend the situation... Please.


Suprise visit!
By bfellow on 2/13/2008 9:21:33 AM , Rating: 5
Suly their's and editur that proofreeds these articules before they get posted.!




RE: Suprise visit!
By omnicronx on 2/13/08, Rating: -1
RE: Suprise visit!
By TomZ on 2/13/2008 10:02:56 AM , Rating: 3
No, this is not a blog entry, it is a news article.

But that's irrelevant anyway - why would anybody publish a blog entry without proofreading it? That would be the fastest way to convince everyone that you're an idiot.


RE: Suprise visit!
By lolxman on 2/13/2008 9:33:24 AM , Rating: 2
Is it really against the law to " cut retail prices to below the cost of production ", doesn't that just show that Intel is willing to lower price. I mean competitors always fight for market shares by lowering prices, but it seems that lowering it too competitively is AGAINST THE LAW.

With the C2D line processors performing so excellently, it only make senses that AMD will suffer since Phenom did not meet expectation, but then its against the law to produce goods that are too good agsinst competitor.

AMD should end their intel=monopoly campaign(and pull down the site) and concentrate on making good processors instead of unshamelessly blaming other for its own failures.


RE: Suprise visit!
By Xenoterranos on 2/13/2008 9:43:02 AM , Rating: 2
Most of the charges against them are for things they (are alleged to) have done a long long time ago (well, 5-ish-plus years ago). The current market situation has little bearing on the charges.

There are tons of articles detailing what Intel has been charged with in the past, present, and future. Most of it stems from strong-arming OEM's into not selling AMD.


RE: Suprise visit!
By Ringold on 2/13/2008 11:20:13 AM , Rating: 2
quote:
AMD should end their intel=monopoly campaign(and pull down the site) and concentrate on making good processors instead of unshamelessly blaming other for its own failures.


Companies, and CEO's, never want to take responsibility. If one retailer does well and another does poorly, then to listen to their quarterly reports the only thing you'd be able to surmise is that, astoundingly, it rained on one side of the street but on the other side it was a sunny, beautiful day. (They always blame the weather on a bad quarter)


RE: Suprise visit!
By bhieb on 2/13/2008 11:41:51 AM , Rating: 2
What I want to know is how this reply has anything to do with proofreading an article. There are several other threads already discussing this aspect, why post here it just clutters stuff up?


RE: Suprise visit!
By MAIA on 2/13/2008 12:44:06 PM , Rating: 2
quote:
cut retail prices to below the cost of production


Read about "dumping" and its implications.

You can start here http://en.wikipedia.org/wiki/Dumping_%28pricing_po...


RE: Suprise visit!
By TomZ on 2/13/2008 1:01:27 PM , Rating: 2
Ironic that you posted a link to that article, when I just replied to another post of yours with the same link...

Anyway, to answer the OP's question more directly, and what is made clear by that article, is that generally there is nothing illegal about selling below cost. There are some situations where that would be illegal, but in the broad sense, it is not illegal.

For example, grocery stores in the US have done this exact thing for many years by offering "loss leaders" to get customers into their stores. That practice is common across retail actually.


RE: Suprise visit!
By Alias1431 on 2/13/2008 10:49:30 PM , Rating: 2
Uh... RANCH. SAUCE.


Intel macs...
By sapster86 on 2/13/2008 11:27:39 AM , Rating: 2
so why are apple allowed to only support intel chips in their new mac's? isn't this a similar situation to a few years ago where manufactures weren't using amd processors?




RE: Intel macs...
By TomZ on 2/13/2008 11:36:46 AM , Rating: 2
Apple absolutely has a right to use whatever processors, or enter into whatever supply agreements, that they want to. You and I, as consumers, have no legal right to force them to use multiple suppliers. We can only vote with our wallet, that's all.


RE: Intel macs...
By cscpianoman on 2/13/2008 11:40:32 AM , Rating: 3
We'll get to them in a minute, first we need to pay for our new cabinets and sports cars with our current piece of work.

~EU


Bad?
By Oregonian2 on 2/13/2008 1:01:56 PM , Rating: 2
Is it just being assumed that the raid on Intel's offices (in the land where AMD has their CPU manufacturing) actually found anything bad for Intel?




Where does the money go?
By docmilo on 2/13/2008 11:17:38 AM , Rating: 1
That's all I want to know. The EU shouldn't get this money because they weren't affected by Intel's actions. The people of the EU shouldn't get this money because they were the one's benefiting from cheap products since Intel was selling at below cost and AMD had to keep prices down to compete.




Duh
By djtodd on 2/13/08, Rating: -1
RE: Duh
By compy386 on 2/13/2008 9:39:33 AM , Rating: 3
It's also business savy to collude with your competitors to drive up profits. The problem is stuff like this is illegal, albeit difficult to prove. You have to show that Intel acted in the sole interest of driving a competitor out of business and establish monopoly power.


RE: Duh
By System48 on 2/13/08, Rating: -1
RE: Duh
By djtodd on 2/13/2008 10:10:19 AM , Rating: 1
quote:
Side note, homestarrunner is the best.


No Doubt


RE: Duh
By Oregonian2 on 2/13/2008 12:29:28 PM , Rating: 2
That's unlikely for many reasons.

One is that Intel has had monopoly power for a long time, pretty much. Especially once Apple trashed the PowerPC processor. Now, for embedded processors or network processors Intel has little success, but for PC sorts of processors, they rule.

Secondly, it's in their interest to keep AMD around, I can't believe that they want AMD to fold. Keep them small, yes, but not fold.

Third, I'd believe it possible that Intel sells processors (at good profit) for less than AMD's fully amortized cost to make processors, and with AMD's being made in Germany I can see how that would be a EU legal problem for Intel. No good deed goes unpunished, one of the golden rules. Intel is a very very efficient manufacturing machine.



RE: Duh
By System48 on 2/13/2008 9:40:14 AM , Rating: 2
Actually, they knocked them down and where just jamming their foot against AMD's throat to finish them off. I agree though, as long as you're still turning a profit overall why not sell low end chips for below cost. The only thing that seems questionable is the "exclusivity" they wanted, not mentioned in this article.


RE: Duh
By sliderule on 2/13/2008 9:42:54 AM , Rating: 2
Isn't Germany invested in AMD?


RE: Duh
By Xenoterranos on 2/13/2008 9:45:07 AM , Rating: 2
The usual tax breaks, etc. But put another way, AMD is heavily invested in Germany.


RE: Duh
By Polynikes on 2/13/2008 10:06:28 AM , Rating: 2
But see, in the EU, they won't allow one company to win, even if it's simply because they're better. Not that I'm saying Intel is definitely better (and certainly not superior enough to put AMD totally out of business), but business is cutthroat, and the EU doesn't like it when companies don't play nice with each other.


RE: Duh
By Aloonatic on 2/13/2008 10:16:34 AM , Rating: 2
So there aren't any anti-monopoly/competitive practice laws in the states?

It's a little easy to take pot shots like that.

It is true that Europe doesn't particularly like what they see as "Anglo-Saxon" business practices though.

There's a fine line in these things between ultra competitive practices and behaving illegally.

The EU/EC seem to be a little more squeamish when it comes to competitive behaviour than in the US and here in the UK.

Simply assuming that any case that involves the EU/EC is protectionist and totally anti-US business is really quite silly and childish though.


RE: Duh
By The Sword 88 on 2/13/2008 10:37:04 AM , Rating: 2
I fail to see how "price slashing" should be illegal. All of the exclusitivity stuff seems shady but I cant help but see this as the EU picking on big American corporations again. It seems like they ar ealways out to get MS and Intel.


RE: Duh
By Aloonatic on 2/13/2008 11:07:50 AM , Rating: 3
I believe the general theory is as follows:

Company A and Company B are in competition

Company A is bigger than Company B but is being made to sell it's products at a competitive rate.

Company A wants to make as much money as it can, is why it started in the first place after all.

Company A goes on an aggressive "price slashing" campaign because it can afford to, knowing that Company B cannot compete with.

On the face of it this is all good and the consumer is happy as it gets the product nice and cheap.

Company B stops being competitive as it cannot compete, Company A dominates the market.

Company A is now able to charge whatever it likes for it's products and doesn't have to innovate as much as it used to.

Suddenly things are not so rosy for the consumer.

A rather simple look at the problem but I hope you can see how "price slashing" is not so good for us all.


RE: Duh
By Ringold on 2/13/2008 11:16:31 AM , Rating: 1
What amusing choices Intel has;

a) Invest in the infrastructure necessary to enjoy lower marginal costs, then lower price and risk being targeted as a monopolist

b) Invest all the same and keep prices high, then run the risk of being targeted with "windfall profit" taxes by people like Clinton and Obama or possibly investigated for collusion by the EU

c) Don't invest and sit on ones butt until the laggard one competes with finally catches up.

At any rate, I don't know how much higher AMD's marginal costs are compared to Intel. Their primary problem seems to be lousy product that just isn't worth much. There is too much profit floating in the CPU market, so even if AMD began to fail I've said it before, rumors on Wall Street suggest it, and I'll say it again: AMD would be bought out by somebody with the cash necessary to bring AMD up to par.


RE: Duh
By MandrakeQ on 2/13/2008 2:07:06 PM , Rating: 2
That's the problem. The x86 business is incredibly capital intensive. No one wants to invest billions into a company just to break even. That would be a bad investment. No, AMD has to hope Intel stumbles and trips in the future or they will never catch up in consumer PC business.

They need to focus on the 8P+ server space right now while they still have an advantage. If AMD makes a Sun Niagra/Rock type processor in the future, they will blow Intel out of the water. That's where they need to focus their efforts. The high end consumer sector they can leave for Intel, while they concentrate on making dirt cheap K8's.


RE: Duh
By TomZ on 2/13/2008 11:24:42 AM , Rating: 2
OK, let me finish the story for you...

Now that Company B is out of the way, Company A raises its prices.

The high prices/margins attract Company C to enter the market, followed by Company D, Company E, and Company F. Company C doesn't do so well, but Company D and Company E does, and Company A is forced to cut prices again.

-----------------------------------

But, looking at the current situation with Intel and AMD, it is pretty clear that AMD's wounds are mostly self-inflicted. They took on a an aquisition that was too large and poorly timed, and even within their core busines of CPUs, they failed to launch next-gen products that worked well and were competitive.

They also continue to fail to properly market themselves in terms of building brand recognition at the consumer and business level, which probably contributed to them losing their "equal footing" with Intel for Dell's online sales.


RE: Duh
By bhieb on 2/13/2008 11:26:08 AM , Rating: 2
Dang it you beat me to it.


RE: Duh
By Proteusza on 2/13/2008 11:46:09 AM , Rating: 2
quote:
The high prices/margins attract Company C to enter the market, followed by Company D, Company E, and Company F. Company C doesn't do so well, but Company D and Company E does, and Company A is forced to cut prices again.


That hasnt worked for operating systems, I dont see why it will work for CPUs.

Desktop CPU manufacturing is too complex and too expensive for companies to just start doing. They need to maintain compatibility with each other while differing from each other.


RE: Duh
By TomZ on 2/13/08, Rating: -1
RE: Duh
By Proteusza on 2/13/2008 12:38:42 PM , Rating: 3
They have a signifant monopoly on desktop operating systems.

Even if Linux some day manages to get a 50% desktop market share, MS has still enjoyed nearly 20 years of charging whatever it wants.

Dont get me wrong - I prefer Windows to Linux - but what I'm saying is that its naive to say that market gaps will always be filled.

Startup costs in the x86 CPU industry are astronomically high, and companies will also likely be required to license technology developed by Intel anyway - such as MMX and SSE. not doing so risks making your CPU not compatible with modern software.

Lets also not forget XGI, which tried to break into the desktop graphics market. When is the last time you heard of them? they were composed of people from SGI as far as I remember, and had planned on making a loss for the first 5 years, yet they have since all but disappeared from existence.

Only the megacorporations, such as IBM and Toshiba, would stand a chance of being able to enter the x86 desktop CPU market. Toshiba actually probably couldnt even afford to do it because of its business deals with Intel.


RE: Duh
By Hare on 2/13/2008 11:51:58 AM , Rating: 2
Maybe if we are talking about restaurants or barbers. Here we have two global companies that together make the whole home computer processor/chipset markets. The absolute scale of their business is so large that other companies simply can't pop up to fill the void and immediately be competitive... And what would stop company A from again pushing the smaller guy out by taking a short term hit themselves...

You definately have a point, but it's really not that black and white as you very well know. I agree with the rest of your post.

Btw. AMD has started a website for all anti-Intel news.
http://breakfree.amd.com/en-us/default.aspx

Maybe they should just focus on making their products better. After all, that's what got them this far...


RE: Duh
By Aloonatic on 2/13/2008 11:56:07 AM , Rating: 2
The cost of entry to this particular market is simply too high for that to be true.

AMD have shot themselves in the foot though with their acquisition of ATI, it would seem.

In the long run however, maybe it will turn out to be an inspired move? I can't see it myself, but hey.

As for the Dell thing, I must admit, whilst I was reading this article their was a radio story going on in the office about an EU/EC raid regarding Dell and Intel. I believe their is an investigation going on there too and may address their apparent failure to generate brand recognition and penetrate OEMs like Dell.


RE: Duh
By Murst on 2/13/2008 12:04:27 PM , Rating: 2
In theory, and in a lot of markets, you are correct.

However, with certain items, such as CPUs, it is not so simple.

Suppose Intel does manage to drive AMD out of business (I doubt that is their goal, but w/e). Sure, a new company could start and produce new CPUs... however:

1. The investment required to build a top-of-the-line fab is probably approaching 5-6 billion dollars. What inversors would want to invest that sort of money in a company that could be driven out of business whenever Intel decided to slash prices again? If there are no protections in the market, it would pretty much be a guaranteed loss.

2. On top of the financial investment required to build a fab, you also need to hire the staff (which is extemely expensive), license all technology (starting out, you obviously would not own any of the IP required to do what you want to do), set up a distribution chain (hell, even now AMD doesn't do this right).

3. Finally, you need to convince consumers that your product is reliable.

So yeah, in most businesses, you can have a startup take on an established business. I don't realy think that applies to CPUs though, at least not this late in the game.


RE: Duh
By Oregonian2 on 2/13/2008 1:00:02 PM , Rating: 2
Like most all new semiconductor companies they'd have to go fabless and use TSMC or its competitors for manufacturing. Nvidia is an example of this where they're large and market leading, but have no fab of their own.


RE: Duh
By Murst on 2/13/2008 1:43:35 PM , Rating: 2
There is a huge difference between creating graphics chips and CPUs.

In order to be competetive with Intel and IBM, you need full control of the fabbing process. There's just no way a company could produce competetive CPUs w/o full control.


RE: Duh
By Ringold on 2/13/2008 1:47:56 PM , Rating: 2
Exactly. For what costs couldn't be initially avoided by going fabless and outsourcing part of the business, I'll again point out that there are firms, individuals and conglomerates with tens and even hundreds of billions of dollars that look each day for profitable markets to enter. Some of these are privately held and thus have unlimited time horizons as well.

Not to even mention sovereign wealth funds, with infinite time horizons, but I wouldn't advocate for those to become venture capitalists. Moral hazard out the wazoo.


RE: Duh
By Proteusza on 2/13/2008 1:06:10 PM , Rating: 2
Name and reliability are huge.

I remember asking the IT guys at my old university why they bought Pentium 4 Prescotts over Athlon 64s, and they said it was because they had tried an AMD system a few years ago, and it failed. Because of one failure, AMD was written off the universities entire life.

Mindsets like that, the expense involved with computer downtime, and Intel's practices, make an already difficult market impossible to enter.


RE: Duh
By bhieb on 2/13/2008 11:24:50 AM , Rating: 2
But you stopped your example too early.

Company A does charge whatever they want...but.

Company C sees the inflated market and starts up new company to compete with Company A.

It is called free market if Company A starts to price gouge there will be start-ups that begin to compete. Yes company A is technically a monopoly, but only until they abuse the power then another company starts up to keep them in check. Now if that abuse is something other than selling your product for the lowest price you can afford (even if it is for the sole purpose of gaining market share), then yes it should be investigated.

This is why I don't really see MS as a monopoly. Yes they have a majority control, but historically the price has always been fair. With Vista I think that begins to change as most would agree that the price is too much for what you get. However, I also think this will allow competitors to thrive making Apple and Linux more competitive.


RE: Duh
By Aloonatic on 2/13/2008 11:48:13 AM , Rating: 2
My reply was a simplistic one for sure and not really specific to this article.

With relation to this article the cost of entry to this particular market is pretty dam high so Company C cannot simply go to their local bank, get a little loan and start competing over night.

Then Company A can bide it's time and destroy Company C in the same way as it did company B, probably even quicker and easier too.

As for deciding what is "fair" probably requires years of economic theory, or maybe we can simply go with "what people will pay"?

The truth is, MS could afford to sell their products for far less and still make a tidy profit, so would that be a "fair" price?

I don't know, nor would I dare to say that it would be as if it were fact.


RE: Duh
By TomZ on 2/13/2008 12:06:13 PM , Rating: 2
True, getting into manufacturing is a capital- and IP-intensive endeavor. But there are in fact companies capable. IBM comes to mind, for example, and I'm sure there are others.

Another market, automobiles, is also very capital intensive, and that characteristic hasn't stopped a good number of companies from competing in that field.

The fact that there is a high capital cost doesn't imply there won't be competition.


RE: Duh
By Aloonatic on 2/13/2008 1:56:16 PM , Rating: 2
True.

A lot of the new auto mobile companies have emerged due to either massive backing from their respective nation states/tax payers or by buying designs and facilities from other companies.

I guess there's room in the future for both of those things to happened in the CPU manufacturing market.

What are the odds on China not having a Processor manufacturer some time in the not too distant future.

Someone could also buy AMD's facilities too I suppose, but they would be starting from way behind and their share of the "pie" would be very modest for quite a long time.


RE: Duh
By Ringold on 2/13/2008 11:08:45 AM , Rating: 1
One has to understand the European attitude to business. In some places, like Belgium, sales of any kind are illegal near holiday's, for example. They still exist apparently, but are done in secret and law enforcement actively attempts to uncover them. In a land where being competitive merely means being spineless (be successful, but not too successful), sales are illegal, and managers were until just recently put in court next to murderers and theifs for having an employee break the maximum allowed number of working hours per week, slashing prices being illegal makes sense.


RE: Duh
By djtodd on 2/13/2008 4:01:12 PM , Rating: 1
...why the negative rating? Sorry if I don't agree with your point of view, but no need to vote me down.


RE: Duh
By TomZ on 2/13/2008 7:35:29 PM , Rating: 2
Criticizing AMD here at DT can be hazardous for your ratings... :o)


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