Advanced Micro Devices, which filed an antitrust lawsuit against Intel on Tuesday, envisions a day when Intel no longer dominates the PC market.
AMDs suit, filed in Delaware, alleges that its larger rival wielded its financial and market clout illegally in order to artificially limit AMDs market share and maintain its own PC processor monopoly. Advanced Micro Devices Inc. also seeks restitution, but declined to offer specifics. Intel Corp., in a statement, denied any wrongdoing.
The suit, which could take a minimum of 18 months to come to trial, isnt likely to effect any immediate changes. But freeing AMD of what it says are measures Intel takes to protect its monopoly could make the PC market more diverse and help lower the cost of PCs, AMD said.
As part of what is shaping up to be a long legal battle, AMD aims to present enough evidence—not the least of which will be testimony by PC makers—to persuade the courts to rule against Intel, creating a new environment in which the two companies compete more directly. AMD thinks that environment will foster more competition and lead to PC makers freely choosing the best processor at the best price for a given system.
The changes, AMD believes, would result in far more AMD-based PCs and open opportunities, such as a possible AMD-Dell Inc. deal. AMD also would be able to use its newfound agility to compete on price and technical terms to earn more wins in business-oriented notebooks, desktops and servers from large, brand-name companies, AMD executives said. Right now, of the largest PC makers in the United States, only Hewlett-Packard Co. offers AMD-based systems to businesses. Dell, Lenovo Group Ltd. and even Gateway Inc. use only Intel in their business systems.
“We deserve to have a significantly larger share of the market than new already have. The only thing thats keeping us from achieving those numbers are the illegal, monopolistic actions of our competitor,” Hector Ruiz, AMDs CEO, said in a teleconference with analysts and reporters Tuesday afternoon.
AMD garnered 16.9 percent of the PC processor market in the first quarter of 2005, versus Intels 81.7 percent, figures from Mercury Research Inc. show. Historically, AMD has had less than 20 percent of the market, while Intel has had about 80 percent of PC processors shipments.
“This will obviously be a very long, running battle between the two companies,” said Dean McCarron, principal analyst at Mercury Research. “However, if the allegations are true, obviously that could influence [AMDs future] market share.”
AMD bears the burden of proof, however. A company must use its dominant position to maintain a monopoly before it violates the law. Thus AMD must first prove that Intel has a monopoly, a slam dunk in the opinion of AMD executives, as well as show that it abused that position.
“AMD needs to show that Intel has effectively impaired competition in the PC market. Its not enough to show that Intel is just a behemoth and a monopolist. AMD has to prove that Intels practices have resulted in less competition or higher prices,” said Hillard Sterling, an antitrust lawyer at Freeborn & Peters LLP, in Chicago.
Ability to Choose
AMDs suit says specifically that Intel used its position—including its ability to offer product rebates or to dole out funds—to influence PC makers to limit their purchases of AMD chips, and therefore to limit consumers ability to choose between different types of products.
The suit identifies 38 companies, including Hewlett-Packard and Dell, which it says Intel has pressured in one way or another. It says, for example, that Intel put pressure on HP to limit its use of AMD chips and that it pressured Dell, which does not use AMD chips, not to start selling AMD systems.
Representatives at Dell and HP declined to comment on the companies role in the suit.
The U.S. Department of Justices antitrust suit against Microsoft Corp. has shown that it can be difficult to prove antitrust violations, Sterling said. The courts ultimately ruled that Microsoft, despite its dominance, still was subject to competitive pressures.
Thus, “if Microsoft faces these types of pressures in their dominated market, arguably Intel does as well,” Sterling said.
AMD might even face resistance from those it says its trying to help, limiting its evidence-gathering capability.
Although it had enough information to file suit, AMD will seek more details from PC makers and others potentially involved in the case. In a pretrial discovery phase, which started Tuesday, AMD will ask for documents and e-mails and later testimony that might support its case.
Thus AMD faces the challenge of getting executives at PC makers to say they would have liked to have gone with processors other than Intels, but that they were pressured or prevented from doing so. It could prove difficult to get Intels customers to speak poorly of it.
“That doesnt appear to hold water under the reality microscope,” Sterling said. “Microsoft has plenty of customers, companies and others to testify of abusive conduct, [but] Intel hasnt made as many enemies in numbers or vigor.”
The key will be smaller PC makers, which are most likely to testify that they were strong-armed by Intel. Larger manufacturers might say it made sense to deal with Intel in order to get discounts, said Roger Kay, an analyst at IDC.
“Its hard to characterize Dell as a shrinking violet, cowering in the corner as Intel stomps around and imposes their will,” Kay said. “It just doesnt sound like the Kevin Rollins I know.”
Intel said in a statement that it strongly disagrees with AMDs complaints. However, it will “respond appropriately to AMDs latest complaints and is committed to successfully resolving these issues in court,” the statement said.
Still, a successful legal campaign by AMD might ultimately change the PC market in some unexpected ways. For one, it could draw interest from antitrust agencies in the United States and elsewhere.
Intel has long set the pace of the PC industry. But a successful court battle could also lead to greater AMD influence the industrys future. AMD, which also alleges in the suit that Intel sought to exclude it from standards-setting bodies for PC components, might exert more influence on the technological directions taken by the PC industry, if it wins the case.
A win also might make it easier for others to enter the PC processor space. Right now, the only other company selling a significant numbers of x86 chips is VIA Technologies Inc.
AMD would welcome the additional competition, said Tom McCoy, AMDs executive vice president of legal affairs.
But even if it AMD should win in court, dont count Intel out as a competitor, McCarron said.
Even if it were to discontinue some practices, such as giving out rebates or co-marketing funds, Intel still could use product pricing or chip bundles, such as its Centrino package for wireless notebooks, to its advantage, he said.
“Theres no question if you buy something together, you get a better price,” he said. “Nobodys established that as unfair.”