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An AMD-commissioned report claims Intel's practices hurt the industry on a massive scale

According to a recent AMD-commissioned study by research firm ERS Group, Intel gained approximately $80 billion USD in monopoly profits over the course of 11 years since 1996. ERS Group director Dr. Michael A. Williams, said that while gaining billions in profits is normal for a company of Intel's size, Intel gained an extra $60 billion by using anticompetitive business practices. Essentially, Dr. Williams' report claims that Intel overcharged for microprocessors and other related products.

Intel has been in a legal situation with the European Union for the last several years, being a prime target for antitrust investigations. Just recently, Intel disputed the EU's claims that its business practices negatively impacted the market and consumer spending. Intel claimed that many if not all complaints were directly from AMD and not customers at all. True enough, most of the complaints filed to the EU have been by AMD and companies that received subpoenas from AMD to release information.

"We are confident that the microprocessor market segment is functioning normally and that Intel's conduct has been lawful, pro-competitive, and beneficial to consumers," said Intel senior vice president and general counsel Bruce Sewell in a statement.

According Dr. Williams' report, Intel collected roughly $141.8 billion USD in profits from 1996 to 2006. The report subtracted normal competitive profits as well as economic profits and something called "assumed advantage profits" of 5%, leaving Intel with $60 billion in monopolistic profits. Despite assumptions using what the report called "standard economic methodologies," it is impossible to determine exactly just how much extra profit Intel gained from a monopoly.

"To be conservative, the study next provided Intel with a generous assumption that 5 percentage points ($28 billion) of its economic return were attributable to legitimate advantages. That left the $60 billion monopoly profit figure," indicated the report.

Assumptions aside, Intel has done very well over the last several years. Its price structure however has not changed drastically -- flagship processors always carry a big premium while lower models always give the better value. Intel's halo processors typically carry a price tag of roughly $1,000 at retail; Intel value processors occasionally fill a sub-$60 price point.

An area outside of the legal system where AMD constantly competes with Intel is in prices. Over the last two years, the price war between AMD and Intel has been nothing less than beneficial to the consumer. AMD recently cut prices on its multi-core processors, giving another shot in the arm to Intel. In this back and forth price cutting, AMD essentially reduces its potential profits. Intel traditionally competes by using heavy marketing campaigns that run on a global scale, but AMD's marketing strategy heavily focuses on the U.S. market -- a small percentage of the overall global market.


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RE: Is it just me...
By mdogs444 on 8/5/2007 7:35:33 PM , Rating: 2
To the enthusiast market, one would think that. And from that perspective I would agree.

However, majority of world-wide computer buyers do not research the performance differences between C2D and X2, Pentium and A64, etc. They buy based on price and what they get for the price - in the basis that more is better. More memory, hard drive space, DVDRW vs DVD/CDRW, larger monitor, etc. Most people that purchase computers from the major manufacturers: Dell, HP, Acer buy retail because its for business or they do not know enough about computers to research, build, and support their own. Its no secret that Intel has a major leg up when it comes to the number of retail computer offerings of Intel vs AMD computers it the market.

There for to us, sure we buy based on performance, price, and overclockability. But the average user buys based upon a packaged price, not performance per megahert.


RE: Is it just me...
By Ringold on 8/5/2007 8:57:16 PM , Rating: 2
If that is all that the standard has to be, "dominant power" in the EU, then every small town resteraunt owner should sue McDonalds for having crushing local dominant pricing power.

My take on the above report:

quote:
It is a tale told by an idiot, full of sound and fury, signifying nothing.


A fine example of using an economist and statistics (and we all know what statistics are) to make an eye-popping claim, a propaganda tactic to make a huge claim and then hope that a smaller one that previously wouldn't of been accepted will be when compared to the previous massive claim.

And even if Intel has been a naughty boy, we should just be thankful AMD survived because at this point it'd do more harm to the processor market breaking up Intel in to multiple CPU firms (if it would even be possible) or sticking them with a huge fine (which would be passed on to customers in higher prices / lower performance sooner or later). Would those actions satisfy government lackey's that get a thrill out of sticking it to big, evil American companies? Yep. The rest of us though would just suffer.


RE: Is it just me...
By Targon on 8/6/2007 7:45:48 AM , Rating: 4
The difference is that you don't see McDonalds selling their products to restaurant chains so they are the majority of the supply chain. It's not just about being in a dominant position, it is being in a dominant position and then preventing people from going to the competition. In this example, it would be like McDonalds forcing restaurants to buy their beef from them, and if they dared to buy from somewhere else, supplies "might be delayed" to the point where the restaurants are afraid to buy from a third party.

That is the anti-competitive sorts of behavior Intel has been accused of doing, where there was a threat, or an encouragement not to buy from the competition, at risk of retaliation.

Now, AMD is not claiming that they should have gotten all of the "monopoly money" the report claims that Intel has gotten, but shows a motive for Intel to keep their monopoly position. $60 billion is a LOT of money, and if you figure that $20 billion has been gotten as a result of unfair business practices over the years that should have gone to their competitors, that's grounds for a fair amount of it to go to Intel's largest competitor if AMD wins the lawsuits.

A lot of elements are not intended to show that AMD should get all the money, but instead just add fuel to the fire when it comes to the legal battle. No matter how impartial judges may be, if there is continued news that shows that Intel has been accused of improper business practices around the world, it WILL add to a pattern of what Intel business practices are.

I do remember when Asus released their first K7 Slot A motherboards that the product was sent out in a plain white box with no fancy packaging of any kind(unlike their Intel motherboards). The general feel, based on comments posted from all over, is that Asus was afraid of losing supplies of chipsets if they hyped their AMD based motherboards as much as they hyped their Intel based motherboards. The K7M was an AMD chipset based board as I recall, one of the first from a big name in the industry to support the AMD Athlon. It was NOT common to find a motherboard to support the new AMD chips in those days. Keep in mind that before the Athlon, AMD processors would work in the same motherboards as an Intel processor since the socket type was the same. This meant that motherboard manufacturers did not need to worry about supporting chips from both manufacturers.


RE: Is it just me...
By MonkeyPaw on 8/6/2007 7:58:48 AM , Rating: 4
quote:
If that is all that the standard has to be, "dominant power" in the EU, then every small town resteraunt owner should sue McDonalds for having crushing local dominant pricing power.


This analogy is quite terrible. Unlike Micky-D's, Intel's customers aren't the end user, it's the OEM that sells the machine to the consumer (when was the last time you bought a CPU directly from Intel?). Because Intel supplies critical components to OEMs, they have significant bargaining power. From the claims I've read, Intel has used this leverage to convince OEMs to sell less AMD products, sell no AMD products, or delay the sale of AMD products. Intel can do this because AMD cannot supply enough CPUs for entire OEM orders (Intel can).

This lawsuit happy world that we live in has people questioning the validity of every lawsuit. However, if AMD's, The EU's, Japan's, and Korea's claims (all have filed against Intel) are true, and Intel's anti-trust activities have significantly hurt AMD's opportunity to make revenue, then the consumer loses.

quote:
or sticking them with a huge fine (which would be passed on to customers in higher prices / lower performance sooner or later).


Where have you been? If AMD wasn't pricing aggressively, how much do you think you'd be paying for a Core2? Notice how this time, when AMD's product is not competative, Intel's prices are lower than the last time this happened (P4)? Since the lawsuits, we've seen better prices from Intel. Heck, we've even seen Dell start selling AMD products. Coincidence?


RE: Is it just me...
By Oregonian2 on 8/6/2007 1:59:23 PM , Rating: 2
quote:
Because Intel supplies critical components to OEMs, they have significant bargaining power. From the claims I've read, Intel has used this leverage to convince OEMs to sell less AMD products, sell no AMD products, or delay the sale of AMD products. Intel can do this because AMD cannot supply enough CPUs for entire OEM orders (Intel can).


Looking from this high-level, isn't a company SUPPOSED to try and get their products purchased rather than that of the competitor? Wasn't AMD trying to get their products used instead of Intel's, and doing so by any legal method they could muster? There may be problems in the methods used, but the goal of selling your company's products to customers rather than having the competition's being bought by those customers seems to be a proper and honorable goal.

quote:
Where have you been? If AMD wasn't pricing aggressively, how much do you think you'd be paying for a Core2? Notice how this time, when AMD's product is not competative, Intel's prices are lower than the last time this happened (P4)? Since the lawsuits, we've seen better prices from Intel. Heck, we've even seen Dell start selling AMD products. Coincidence?


Also note that Intel changed "administrations" a few years ago, that may have had an influence as well.


RE: Is it just me...
By Treckin on 8/5/2007 10:37:23 PM , Rating: 2
Just to be clear, AMD charges that Intel intentionally locked AMD out of the pre-fab computer market by offering price specials to companies (Dell, HP, then-Compaq, IBM, all the various laptop manufacturers) who agreed to exclusively sell Intel-Inside. If anyone here has any sort of memory, the only computers that you could order which contained AMD procs were lower-end E-Machines and the like... All of the major OEM's had deals with Intel.

For 110 years, under the Sherman Anti-Trust Act and action by a buisness which would make it difficult for their competitors to access markets is illegal. What Intel did was against the law. This lawsuit on the other-hand supercedes the post-C2D by at least 6 years, 8 in some territories.
Intel will likely have to pay for their practices in Europe, however the conservative court-packing that the last 20 years has seen leaves their fate in the US unsure.


RE: Is it just me...
By Hakuryu on 8/6/2007 12:07:00 AM , Rating: 2
That doesn't make alot of sense to me. Many deals are made to exclusively sell one type of product over the other, or simply to favor that product.

If I remember correctly, there was an article here about Sony and Blockbuster entering a deal to favor Blue Ray. If Sony went out to every seller around and got this same deal, then they would be anti-competitive? I'd just call that smart managers on Sony's part.


RE: Is it just me...
By emboss on 8/6/2007 5:42:37 AM , Rating: 3
Exclusivity deals per se aren't illegal. The combination of a market dominance/monopoly and exclusivity deals can be.


RE: Is it just me...
By Targon on 8/6/2007 7:55:22 AM , Rating: 2
I don't think that the laws are the same when it comes to "standards", but also, there is no monopoly in place when it comes to the HD market at this point, since standards are still trying to be set by the different players.

It's not the "type" of product that falls under the laws, it is the branding that does it. If one COMPANY is a dominant force, then that company needs to be careful of the monopoly laws, but there wouldn't be laws about engine types used in cars, just if the engines were supplied by only a handful of companies with one huge dominant player that was using questionable business practices for that player.

From that perspective, the whole Verizon vs. Vonage legal battle ALMOST falls into this category except that there are multiple phone companies around, which means that Verizon is NOT a monopoly in the traditional sense. I have seen that calls between Verizon land line services and VOIP or other cell phone carriers tend to be less reliable than from Verizon cell phone service and Verizon land lines. That could be grounds for a good lawsuit too.


RE: Is it just me...
By 9nails on 8/5/07, Rating: 0
RE: Is it just me...
By Samus on 8/6/2007 4:26:13 AM , Rating: 2
Uhh, just for the record 9nails, AMD cpu's traditionally have less errata than Intel CPU's, generation after generation. And when you factor in that most high-end applications and games are optimized for both platforms (SSE and 3DNOW!) there is little...very little room to cry 'compatibility.'

If you're thinking of the 'Compatible with Windows' statements that AMD, Cyrix, and IDT had to use back in the day, that was because people were ignorant of the x86 architecture, much like yourself, that they needed a little reminder that its really 'Apples to Apples' in the end.

It's is, and always has been, a battle of performance, price, flexibility, and owner loyalty. Compatibility has never been a debatable topic.


RE: Is it just me...
By emboss on 8/6/2007 5:52:37 AM , Rating: 2
Personally, I base my tech purchases on the current situation, not the situation as it was nearly 10 years ago (5 generations in electronics). AMD hasn't had "compatibility" problems since the slot-A days, when VIA's chipsets were causing all sorts of problems.


RE: Is it just me...
By rcc on 8/6/2007 5:04:44 PM , Rating: 2
Really big companies also tend to be quite conservative in buying habits. And IT managers likewise. For instance...

An IT manager has to purchase 1000 computers, probably from Dell or HP. If processor even comes up, regardless of his personal preference, he/she will most likely go with Intel. Why? Because they are the major player in the market. And it's an unfortunate fact in the business world that if there is a problem with these computers it goes like this.

If they are Intel, upper management will say "it's an Intel problem, no way to predict it, get IT on the fixes".

If it's an AMD/other processor, they'll say "AMD? Who authorized this second rate stuff, I want some heads". And the IT manager will be pounding the pavement.

Bottom line, in big business, taking risks will get you a big gain, or loss. On procurements, anything but the mainstream largest supplier is a risk, calcuated or otherwise. Most people are very careful about risking their jobs. Unless they are too young to care or know, or rich enough that it doesn't matter.


"Intel is investing heavily (think gazillions of dollars and bazillions of engineering man hours) in resources to create an Intel host controllers spec in order to speed time to market of the USB 3.0 technology." -- Intel blogger Nick Knupffer














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