AMD's antitrust lawsuit against Intel could lead to lower PC prices, but the only thing that's certain is it will be a long wait before the case reaches any kind of conclusion.
Looking to break what it claims is Intel's stranglehold on the corporate PC market, AMD said this week it will try to speed the case to a trial in US District Court in Delaware within 18 months. Analysts warned, though, that the charges will be hard to prove.
In its 48-page complaint, AMD claimed that its sales of processors to hardware vendors for desktops, laptops and servers are being hurt by the use of exclusive deals and coercion on the part of Intel. AMD's Japanese subsidiary made similar allegations of anticompetitive acts in a complaint filed against Intel's Japanese unit in a Tokyo court.
"Buyers have no choice but Intel (now)," said Roger Kay, an analyst at IDC. "If they could pit the two together, they could get a better price."
It's no great secret that Intel gives so-called market development funds to PC vendors to support marketing activities involving systems based on its chips, Kay said. But proving that the funding is dependent on maintaining an exclusive relationship with Intel or fulfilling a quota for its chips could require more than just producing evidence about "suspicious-looking behaviours," according to Kay.
"In a market where there is competition, which supplier is not going to offer some kind of benefit (to its customers) if they are prepared to commit to some kind of exclusivity?" said Brian Gammage, an analyst at Gartner.
In its lawsuit, AMD listed nearly 40 major vendors that it claims have been adversely affected by Intel's business practices. The lawsuit contends that Intel used its market power to force hardware vendors to limit or exclude the use of AMD's chips in their systems — a process that the lawsuit refers to as 'knee-capping'.
For example, Dell does not offer any AMD-based systems — a fact that Dell executives have partly attributed to a desire to maintain the pricing deals they get from Intel. IBM does use AMD's Opteron processor in some of its servers, but said that it would continue to limit its marketing of the Opteron-based systems to high-performance technical computing applications.
IT managers have enough clout with server vendors to convince most of them to offer systems with Opteron, according to Charles Diamond, a partner at O'Melveny & Myers, AMD's lead outside counsel on the lawsuit.
But the same isn't true in the PC market, Diamond said. IT buyers who deal with the top PC vendors have only Intel-based products to choose from, he said, claiming that this deprives users of options and drives up costs. "If that's not harm to consumers, I don't know what harm to consumers is," commented Diamond.
Paul Otellini, Intel's president and CEO, said in a statement that Intel officials "unequivocally disagree with AMD's claims" and expect the lawsuit to be resolved in Intel's favor. "We compete aggressively and fairly," Otellini said. "This will not change."
In March, though, the Japan Fair Trade Commission ruled that Intel had abused its monopoly power in that country's processor market. At the time, Intel said it disagreed with the findings but pledged to refrain from several types of business practices.
But private antitrust cases are settled out of court 95 percent of the time, said Rod Thompson, an attorney at Farella Braun & Martel in San Francisco. He also noted that AMD is asking for a jury trial, which usually requires much more preparation time.