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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 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.


"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation














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