AMD says Intel crosses the line

AMD’s antitrust lawsuit alleging that Intel coerced hardware vendors and retailers into using Intel’s chips has cast a giant spotlight on the world’s largest chipmaker and the way it promotes its products in the PC industry.

Free IT resource Virtualization Insights from Top Experts - Learn how virtualization gets real! Sponsored by Dell Free IT resource Try Sun servers, workstations and storage products free for 60-days. Sponsored by Sun Microsystems

As the lawsuit progresses, it is bound to capture the attention of much of the tech industry -- 38 companies received notices from AMD, requiring them to keep documents related to this case. As a result, the system under which PC vendors make their buying decisions will come under unprecedented public scrutiny.

AMD alleged that Intel went beyond aggressive marketing and repeatedly browbeat PC vendors into limiting their purchases of AMD processors through the selective distribution of market-development funds -- cash payments that help PC vendors fund their marketing programs -- and rebate checks triggered by certain levels of purchasing.

For example, in 2002, when AMD tried to offer chips for Hewlett-Packard (HP) to use in its Evo commercial desktop line, HP asked for a $25 million quarterly fund to compensate it for expected retaliation from Intel, AMD’s complaint said.

“This trial will boil down to how permissible it is for Intel to use these various marketing programs,” said Dean McCarron, principal analyst at Mercury Research.

These marketing programs help Intel and the PC companies extol the virtues of various technologies, such as Intel’s Centrino mobile technology, McCarron said.

Intel Denies Any Wrongdoing
“We unequivocally disagree with AMD’s claims,” said Paul Otellini, Intel’s president and CEO.

Intel competes aggressively but fairly, he added.

Should AMD prevail, Intel would have to discontinue the programs, or at least curtail them, McCarron said. And it would probably have to cut its prices to keep the PC industry from losing money on each unit it sells.

Many analysts feel AMD has a technology lead over Intel at the moment, with the successful introduction of its Opteron and Athlon 64 processors. Despite the positive reviews that third-party testers have bestowed on the chips, compared to Intel’s offerings, AMD has not outgrown the market in the last few years, said Kevin Krewell, editor in chief of The Microprocessor Report.

“I’m not saying AMD is completely right, and I’m not saying Intel is the Darth Vader of semiconductors, but [AMD] probably should have gained more market share than it did” with its new products, Krewell said.

If nothing else, AMD’s antitrust lawsuit will force Intel to be very careful with its sales and marketing during the next two years, which could give AMD an opening to expand its market share, Krewell said.

The final outcome is very much in doubt at these early stages, however.

“Historically, I’ve always believed that Intel took its obligations as a dominant supplier in the marketplace very seriously,” said Nathan Brookwood, principal analyst at Insight 64. “If the AMD claims have any basis in fact, it’s going to shake my perspective on this.”

-- Martyn Williams and Sumner Lemon of the IDG News Service contributed to this article.