Forbidden Business Practices
AMD officials have contended that Intel illegally used conditional rebates and coercion to convince OEMs, including Dell, Hewlett-Packard and IBM, to limit their use of AMD products. In addition to specifying the payment Intel will make, the deal lays out a number of business practices that Intel has agreed not to conduct, including conditional rebates. It also sets up a dispute resolution policy-which includes quarterly meetings among executives, and mediation and arbitration steps-with the aim of keeping future disagreements out of the courts.Regarding the list of business practices that won't be allowed, Otellini said Intel agreed because it had never practiced illegal behavior. "From our side, we won't do these things, we haven't done these things, so from that point of view, nothing really changes," he said. However, Endpoint's Kay said Intel has been known to use its money and market dominance for years to influence OEM purchases, and recent e-mails from officials at Intel and OEMs that have been made public in a lawsuit filed in November by the N.Y. Attorney General's Office illustrate this. In one, Dell CEO Michael Dell complained to Otellini that not using AMD processors in exchange for Intel payments had put Dell at a competitive disadvantage. "Despite what Otellini said on the call [with reporters and analysts], these e-mails from Michael Dell were pretty damaging," Kay said, adding facetiously: "The behavior that Intel hasn't been practicing ... they haven't been practicing it for more than a decade." John Spooner, an analyst with Technology Business Research, said the settlement gives OEMs some breathing room. "It essentially eliminates the fear factor, whether or not it was really happening," Spooner said. "There was a fear ... that if they used too much AMD [technology], [they risked] retribution. This gives HP and the others the ability to use whatever they want to put into their products." That's good news for AMD officials, who clearly believe that they were denied market share due to Intel's practices. However, it also could result in a segmentation of the market, at least in the booming notebook space, Spooner said. Right now, Intel has a competitive edge over AMD in the notebook market, and systems makers may drive AMD products down into the lower end of the market. That will be less likely in the server space, where AMD's products are competitive with Intel's.
"If they can settle their differences on the playground rather than in the principal's office, everyone will be better off," said Clay Ryder, an analyst with the Sageza Group. "It's an infinitely better approach than spending time in the courtroom."