October 05, 2006

In Search of Another Monopoly: Intel and the EC

It has been reported that the European Commission review panel has weighed evidence bought against Intel in order to this week to choose whether or not to file formal antitrust charges related to alleged unfair competition against AMD. The Commission has been investigating Intel for several months regarding its rebate schemes to determine if these schemes violate regulatory conditions. If the decision is made to approve the case team assertion that Intel’s schemes are illegal, it would advance the Commission’s decision to make a formal Statement of Objections against the company. At this point, Intel would have the opportunity to respond to the charges. There was no deadline stated for the Commission to decide whether to take the case further.

Given the EC’s proclivity to investigate monopolistic practices ad nauseum, it is amazing that Intel has largely escaped unscathed so far. There are few IT targets as large or larger than Microsoft, a perennial target of EC investigators, and Intel with its commanding position in the microprocessor marketplace is a logical candidate. AMD is the main player in this, as it is the one with so much to gain. Although Intel and AMD have had legal skirmishes in the past, Intel has generally be able to outflank the arguments of its smaller contender, and until a couple years back, had been rather successful in keeping AMD marginalized, or viewed as the low cost, or “other” provider of x86 technology. With Opteron, AMD became a much more visible thorn in Intel’s side and despite slow adoption of its compatible 64 bit computing by a certain large ISV in the Northwest of the US, has been voraciously eating away at Intel’s market share. As this has unfolded, Intel has done its best to keep its customers in line, whether it be through attempts to staunch the 64-bit dilemma by releasing EMT-64, or through various less public means, including the ways in which it prices chips for it various large volume customers and provides co-marketing dollars. It is these types of actions that AMD contends are unfair/illegal.

While we have no insider knowledge of any of these actions, we are observers of the industry nevertheless. When Opteron was launched it was very interesting to see how traditionally strong Intel partners reacted. IBM, for example, embraced Opteron early on, but did an interesting dance and branding two step as it pigeon holed the Opteron as a HPC only solution, and branded its servers outside of the xSeries, the official home of Intel compatible architectures. Microsoft made announcements that it would support Opteron, but then didn’t release Windows Server code until April 2005, many, a moon after Opteron’s general availability. Similarly, HP announced Opteron servers, only after Intel announced EMT-64. Ironically, it was Sun Microsystems, the traditionally SPARC only shop that took the greatest interest in Opteron and was quick to promote all the glory of the platform.

So where does this leave us? By 2006, the market has warmed considerably to Opteron, and even Big Blue straightened out its thinking re: Opteron. Has Intel engaged in anti competitive practices? We are sure the EC will tell us their view, but from the viewpoint of market watcher, it would take a credulous observer to not wonder why the big players acted the way they did back in 2003 and 2004. For an agency that is besides itself with reaction to Microsoft Vista, some of apparent machinations of Intel would seem hard to dismiss without a very close look.

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