AMD Alleges Intel Monopoly Abuse

AMD (NYSE: AMD) is accusing Intel (Nasdaq: INTC) of serious abuses of its dominant position in the computer microprocessor industry, saying the industry giant coerced manufacturers including Dell, HP (NYSE: HPQ), Sony, Acer, Fujitsu and others away from AMD products, thereby limiting the challenger's ability to compete.

The allegations are part of a federal antitrust complaint filed by AMD against Intel in Delaware this week, wherein AMD accuses Intel of violating the Sherman Antitrust Act, Clayton Act, and other laws against anti-competitive behavior.

"Everywhere in the world, customers deserve freedom of choice and the benefits of innovation -- and these are being stolen away in the microprocessor market," said a statement from AMD President and Chief Executive Officer Hector Ruiz.

"Whether through higher prices from monopoly profits, fewer choices in the marketplace or barriers to innovation, people from Osaka to Frankfurt to Chicago pay the price in cash every day for Intel's monopoly abuses."

Shouldered Out of x86 Space

AMD said the predominance of x86 architecture chips for computers and Intel's predominance within that space -- about 80 percent of sales and 90 percent of revenue, according to AMD -- was constraining competition in the industry.

AMD cited the Japanese government and included statements from former Compaq CEO Michael Capellas in detailing its complaints against Intel, which is accused of not only bribing and bullying PC manufacturers but also major retailers including Best Buy (NYSE: BBY) and Circuit City (NYSE: CC).

"You don't have to take our word for it when it comes to Intel's abuses," said a statement from AMD Executive Vice President of Legal Affairs and Chief Administrative Officer Thomas McCoy. "The Japanese government condemned Intel for its exclusionary and illegal misconduct. We encourage regulators around the world to take a close look at the market failure and consumer harm Intel's business practices are causing in their nations."

Intel was preparing a response to the court filing today, a company representative told TechNewsWorld.

Payments and Pressure

AMD alleges bad business practices from Intel that include "huge sums" paid to Intel and Dell, according to industry reports and confirmed by Japanese regulators, purportedly paid to prevent business with AMD.

The smaller chip company also alleges Intel forced other manufacturers into partial exclusivity agreements by conditioning rebates, allowances and market development funds on manufacturers' agreements that limit or eliminate AMD as a supplier.

"Intel paid Sony millions for exclusivity," said an AMD press release. "AMD's share of Sony's business went from 23 percent in '02, to 8 percent in '03, to 0 percent, where it remains today."

AMD also said that when it successfully got on HP's retail roadmap for mobile computers and the products sold well, Intel responded by withholding HP's fourth quarter rebate check and refusing to waive HP's failure to achieve its targeted rebate goal, allowing HP to make up the shortfall by promising Intel 90 percent of its mainstream business.

If Real, Then Wrong

Gartner (NYSE: IT) Research Vice President Martin Reynolds told TechNewsWorld a lot of the alleged practices "sounds real."

However, the analyst added the claims will have to be tested in the courts, which will determine whether the practices did or did not occur.

"If it did happen, it was wrong," Reynolds said. "Then they have to decide what to do about it."

The analyst said although the circumstances and issues of the matter are grey, as opposed to black and white, rectifying the situation may not be as complicated and may simply mean checks on Intel's practices.

AMD's Other Challenges

Reynolds indicated AMD's position is shaped by its own resources and actions as much as Intel's resources and actions.

"Ultimately, AMD's ability to compete is limited by their capital investment as much as it is by anything Intel does," he said.

The analyst doubted whether the AMD allegations would be resolved soon, or whether they would have a significant impact on the industry.

"I think this is going to take a long time to resolve, and I think in the end, things won't be very different," Reynolds said.