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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 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.

"Well, we didn't have anyone in line that got shot waiting for our system." -- Nintendo of America Vice President Perrin Kaplan

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